Are You Using “Free Money” to Help Pay for Your Advertising?Katie Pray
Love makes the world go around, right? Sure it does, but so does money, and Jerry Maguire said it best; “Show me the money!” What could possibly be better than money? How about free money! In the advertising world, that is a real thing for certain businesses, and it is called Cooperative Advertising, or Co-Op. This is when advertisements by retailers include the specific mention of manufacturers or brands who in turn repay the retailers for all, or part of the cost of the advertisement. There are different variations of how a manufacturer will pay for a campaign. For example, they may just pay for their product to be featured in an ad, or the retailer may receive a credit for future purchases with that manufacturer. Co-Op is a phenomenal advertising opportunity because it is a win-win for both the retailer and the brand, but believe it or not, it doesn’t always get used.
The Co-Op market is one that tends to get overlooked and also goes untapped because some businesses don’t even know they have funds to use. Others simply just don’t know how to redeem those funds. One of the main drawbacks for businesses and Co-Op is that the process to get it can be a bit clunky. To start, businesses have to work with a manufacturer that offers Co-Op, but what kind of businesses even offer it? Here is a list of verticals that tend to work with Co-Op manufacturers:
- Heating and Air
- Flooring Companies
- Farm Stores
- Home Improvement
- Small Engine Repair
- Auto Dealers
- Online Retailers
- Furnishings and Appliances
- Farming Equipment and Supplies
- Motorcycles, Snowmobiles, Boating, and ATVs
- Building and Construction
- Lawn and Garden
Some other obstacles that get in the way of businesses using their Co-Op funds are they believe there are too many restrictions and rules, and there’s too much paperwork that goes along with getting that credit.
Let’s look at a real example of how Co-Op can work with the well-known online pet retailer, Chewy.com. If we go to the Chewy.com website, we can see a list of brands and manufacturers that they work with.
Taking a look at all the different brands, the next step is we have to find out if any of those brands offer Co-Op advertising. This is where you can come in and save the day and become a resource with the process for those businesses because we have made it very easy to help you get all the information you need. With access to a database of over 2,000 different Co-Op programs, we can do the homework for you and determine if there is any Co-Op available for a particular brand, and if so, how much is available. For this, we will want to know the name of the business, and the manufacturers or brands that they purchase from. Once we have that information, we will let you the details about the Co-Op that is offered with a “Co-Op plan sheet”. Here is a Co-Op plan sheet for Blue Seal, which is a brand that Chewy.com works with, so let’s take a look at how to read it and understand what it all means.
In this example we are looking at Blue Seal as the manufacturer and we can see they do offer Co-Op since it says “Active Plan” in the Co-Op Plan Title:
Not all manufacturers are going to have the same type of plan available; it varies. An “Active Plan” means that manufacturer has Co-Op guidelines available. If the Co-Op plan sheet says “Partial Information Available”, that means that is a plan where some plan details have been provided by the manufacturer, but not the complete set of guidelines. “Specially Arranged Co-Op” are plan types arranged on a case-by-case basis with their manufacturer rep or regional rep. “Undisclosed by Manufacturer” are plan types where Co-Op programs are available, but the manufacturer will only share guidelines with dealers or retailers, and “No Co-Op Available” are plans where the manufacturer does not currently offer a Co-Op program.
The next thing we want to look at is the contact information:
Here it’s going to tell us who must give ad approval, and it has their name, phone number, and e-mail address. It also lists where claims get submitted and when they have to be submitted by. It will also explain how they are going to reimburse that business. With Blue Seal, Chewy.com is getting their reimbursement in the form of a credit. That means, however much Blue Seal is going to give Chewy.com in Co-Op, they get that reimbursement through a credit memo the next time they purchase product from Blue Seal. It is also list the Accrual Period, which is the time frame Blue Seal has set during which Chewy.com can earn Co-Op advertising funds. In this case, it is showing us they offer Co-Op funds based on the purchases that Chewy.com made from October 1st through September 30th, so the amount of Co-Op that is available is based on what they currently spend. Sometimes it’s based on the previous year, meaning what is available is based on what Chewy.com spent with Blue Seal last year. Another piece of information we are going to note on this page is the Performance Info. The performance info is when the Co-Op is available to be used. In this example, Chewy.com can use that anytime within the current year. The last thing we are going to need on this page is the Co-Op Claim Address, and that’s where the claim to get reimbursed must be sent and that’s an important piece of the Co-Op puzzle because if it isn’t submitted properly or on time, Chewy.com could risk getting reimbursed from Blue Seal.
In the middle of the page it is going to list the details on what they are offering for their Co-Op. Under qualifying products, this is showing that they offer Co-Op for campaigns that are talking about the Blue Seal animal and pet feeds. Under participation, you’ll see how much Blue Seal is going to give Chewy.com. The participation percentage can be anywhere from 80% of the cost of the campaign, up to 100% and it will be different for each manufacturer or brand. Some have participation rates as low as 2%, and some go all the way up to 125% where the manufacturer is actually giving a business more than what they are spending on a campaign (even more free money). Accrual percentage is percent of new purchases that the retailer has made in terms of what they purchase from the manufacturer. For Chewy.com, 2.5% of that is what can go into the Co-Op fund. Clear as mud, right? Let’s look at an example:
Chewy.com has $200,000 in purchases from Blue Seal:
- Accrual is 2.5% = $200.000 x 2.5% – $5,000 in Co-Op funds earned
- Participation % is 80% = Blue Seal will reimburse for 80% of the ad campaign
- $6,000 ad campaign = $1,200 paid by Chewy.com (20%), $4,800 paid by Blue Seal’s reimbursement memo (80%)
In the example above, Chewy.com only has to pay $1,200 total of the ad campaign, and then they will receive a credit memo from Blue Seal for $4,800.
Moving further down our Co-Op plan sheet, we see plan comments. Here is where any additional information is going to be listed about the Co-Op. For example, here we will find out that unused funds do not carry over, ads requiring prior approval must be submitted a minimum of 30 days prior to the run date, and ads with just the dealer name and no logo or with the dealer name and services and no specific product featured will not qualify for Co-Op (for once, this is where I would encourage you to read the fine print).
Down at the bottom is the claim reimbursement information. This is what has to be submitted to Blue Seal in order for Chewy.com to get reimbursed.
Once everything has been approved from both the manufacturer and the business, it’s time to assemble the claim package so the business can get reimbursed. You’ll want to make sure that you have checked the deadline submission, you’ll obtain a marketing reimbursement form the manufacturer, and you’ll collect any necessary documents that are listed on that claim form. Typically that will consist of a copy of the invoice, a copy of a monthly report, some form of documentation on the approval to run the ad, a screenshot of the ad, and the signed form itself.
While the Co-Op process can be a little tricky, we try to take the guess work out of it to make it as seamless as possible. We have all been out to eat with someone who tends to get “t-rex arms” when it’s time to pick up the check, so by getting “free money” with Co-Op advertising, you no longer have to be “that guy”. Take a look and see what Co-Op dollars you can take advantage of.