Making Co-op Marketing Funds a Source of Revenue for Both Manufacturers and their Channel Partners
In a study conducted by Borrell Associates, it was revealed that an estimated $70 billion was allocated to Co-op advertising programs in 2017 alone. Surprisingly, nearly half of these Co-op marketing funds were never used. Surveying 178 marketing companies that provide services to small business (SMB) markets, shows that the staggering amount of unused money is partly due to partners being unaware of the Co-op funds or hindered by the restrictions and amount of work vendors require from their partners to .
The survey, organized by LSA and Manta, shows that the 4 biggest obstacles to partners’ usage of Co-op marketing funds are:
Let’s take a closer look at these obstacles.
Unaware of Specific Co-op Marketing Funds Opportunities
While some vendors take a hands-on approach with their partners, the majority of provide little to no guidance – leaving their partners to figure out on their own the complexity of the Co-op programs available to them. Thus, most of these vendors’ partners are even unaware of specific Co-op marketing funds opportunities.
According to 2010 U.S. Census data, there are roughly 28 million SMBs in the U.S. Of these 28 million only 12 million SMBs are eligible for Co-op marketing funds. However, only 42% of these eligible businesses take advantage of their vendors’ Co-op programs. Without the knowledge of available programs, it would make it quite difficult for channel partners to even take the 1st step.
It takes time and resources for a partner to comb through all their different vendors’ Co-op programs. Smaller partners often do not have a dedicated employee for searching and locating all available Co-op marketing funds opportunities.
Solution:
In such cases, consistent communication on behalf of a vendor through a centralized hub where partners can have to advisory boards, news, and new information, would be beneficial.
In addition, consider announcing the program through partner conferences and conventions, webinars, e-mail blasts or partner newsletters.
Handling Paperwork
According to LSA, the most common documentation vendors require from their channel partner in order to qualify for a Co-op marketing funds are:
- Co-op Advertising Claim form
- Prior Approval form
- Copy of ad
- A Certified proof showing that campaign was actually executed
- Invoice
Prior to the submission process, partners have to browse through instructions and information to see what programs are available and find out if the rules of these available programs fit their market, customers, and campaign plans.
Consequently, small businesses, that are too busy with the day-to-day operations of running a business, do not appreciate the amount of extra paperwork manufacturers require for granting them Co-op marketing funds.
Solution:
Reducing the number of documents that a partner needs to submit every time a claim is made, should open the doors to a strong channel partnership. Remember, partners, tend to have multiple vendor relationships and the one that makes life easier for them will most likely become their preferred vendor.
Consequently, by using a web-based platform you eliminate paperwork and manual processing. Most automated platforms offer document management functionality where channel managers can upload vendor’s digital assets and all the guidelines for creative executions.
Too Many Rules/Restrictions
Manufacturers tend to place a hefty number of rules and criteria on their Co-op programs. It’s no wonder SMBs participation in Co-op programs is low.
42% of partners that have access to Co-op marketing funds are small businesses with 11-50 employees. These businesses neither have the time nor the personnel to study their vendors’ complex and convoluted programs.
31% of partners in the LSA and Manta survey are less inclined to use the funds once they have discovered the requirements for co-op advertising and/or for the proof of performance.
Furthermore, most vendors’ tend to have an inconsistent process. Marketing programs change frequently to adapt to evolving market conditions. In such situations, vendors need to keep at least the processing and approval procedure consistent.
Solution:
A successful Co-op program offers flexibility without losing the vendor’s key branding elements and establishes a moderate number of well-defined rules.
Using a prior approval process will save time and frustration when it’s time to evaluate claims. Prior approvals ensure awareness and approval of activities before they’re executed. Therefore, confusion and misunderstanding can be avoided when claims are submitted.
Prior approvals can be as general as indicating the type of activity and its estimated impact. Or, they can be very specific, requiring the approval of artwork, radio/TV scripts, or review of plans and break down of activities for an event.
Therefore, it’s important to provide specific guidelines regarding the necessary documentation for supporting a claim (proof of performance). For example, a copy of the actual print ad or a copy of the radio/TV script validated with an invoice and proof of payment.
Claiming and Proof of Advertising
The goal of Co-op advertising programs is to drive consumers to local merchants to buy vendors’ products. However, the cost of local marketing for a small business can be steep. When participating in their vendors’ Co-op programs, partners have to front the money and then wait for the vendor’s reimbursement. Most small businesses count on this money for running a business, payroll, inventory, etc…
It should be pretty straightforward: Partner runs the advertising according to vendor’s co-op program guidelines and submits a claim, a proof of performance, and a copy of the media invoice. Then the vendor pays their share. However, studies show, on average it takes partners up to 2 months to get any type of reimbursement.
Solution:
Re-examine your co-op claim submission and reimbursement process to make sure that they are transparent and easy for your partners to follow.
Requiring a prior approval request form as part of your program’s rules decreases the probability of receiving invalid claims.
Furthermore, streamlining the approval and reimbursement processes through a centralized cloud-based platform will help resolve this issue.
Typically, manufacturers fund from 30 to 50 percent of partners’ advertising costs, though contributions from 75 up to 100 percent aren’t uncommon.
Have you Considered Using an Automated Co-op Marketing Fund Solution?
Co-Op marketing programs are best utilized on one centralized platform that is capable of managing how Co-op marketing funds are assigned, disbursed, and tracked.
Such platforms enable channel partners to manage their accounts, access program information, submit data, apply for advertising funds, track their campaign’s approval status, monitor their accrual funds, upload claim documents, and track reimbursements.
CMR's Co-op Management Application:
Our web-based Co-op/MDF application is used to simplify and accelerate both the Prior Approval and Claims procedure.
Computer Market Research’s application provides unmatched visibility on channel spending for improved ROI. Our Co-op Management tool enables you to operate your Co-op programs on a global scale. Co-op solutions are entirely configurable so that channel management teams can build and deploy their own marketing programs that support their unique program guidelines.
Gain insight into your entire prior-approval to payment process with a granular view of marketing expenditures, claims, payments, and partner activity.
Features and Benefits of Computer Market Research’s Co-op Management Solution:
Benefits
- Easily configurable
- Expedites approval process
- Easily identifies new marketing opportunities based on partner performance
- Increases partner satisfaction and reduce program costs.
- Optimizes fund allocation.
- Improves tracking and monitoring of account usage by setting up annual or quarterly budgets.
- Includes multiple security levels
Features
- Up-to-date information on balances, prior approvals, claims, and check requests.
- Closed-loop analytics
- A three-tier architecture provides connectivity to any ODBC compliant database.
- Supports accrual and discretionary funding models
- Password security ensures confidentiality and controlled access.
- Tracks marketing funds by customer, territory, or fund type including shows, ads, and training.