For brands and manufacturers that sell through local distributor partners (retailers, dealers, VARs, franchisees, etc.) co-op marketing is a big line item. Sharing the cost of localized marketing with partners has to be a sizeable investment because it’s the cornerstone upon which much of local marketing for big brands should be built. Despite the heavy investment in co-op marketing, many brands struggle to get their partners to take advantage of subsidized or even free marketing; some 5-7 billion dollars slated for promotional allowances goes unused each year according to Borrell Associates.
There are plenty of reasons why co-op or market development funds (MDF) go unused. Additionally, there is currently a rift between the archaic structures and policies embedded in many co-op marketing programs and the fast evolving digital marketing they sometimes fail to fund. For the full deep dive, please see our Co-op Marketing White Paper. For the purposes of this brief article, we will talk about three critical co-op mistakes and the best practices for reversing them.
Co-Op Marketing Mistakes
1. Making Partners Pay First
The “you pay first and we will probably reimburse you later” model doesn’t work for most partners. It is an immediate obstacle for partners that have tight cash flow, and can’t go out of pocket, or don’t want to deal with the headache of a claims process to justify the money they spent. This is the old-style model where partners are issued some sort of co-op kit or launch pack > a small ambitious number of partners plan & execute local marketing > then partners’ claims are judged for brand compliance and reimbursed in full or partially. Notice the inherent risk in this process for the local business. If their marketing materials are deemed out of compliance, they are out money that they expected to get back, and will most likely never participate in marketing campaigns for your brand again.
If your brand has hundreds of partners procuring their own local marketing from unspecified vendors or marketing services partners (MSPs), directed only by loose guidelines, the reimbursement model is a nightmare to manage. This complex system cost time in money for the brand and the local partners alike. However, if all the MSPs are preapproved and aggregated in some sort of a “partner portal,” it’s more manageable, but far from ideal.
Best Practice: Disburse co-op marketing funds simultaneously when partners select pre-approved marketing activities. The new best practice model of co-op marketing eliminates separation between fund disbursement, marketing activity selection, and marketing service partners (vendors).
Partners log into a local marketing software where pre-approved marketing programs are selected and funds (in various flexible formats) are applied. The local partner never even realizes there are multiple MSPs executing the programs in the background because they are seamlessly integrated into the platform.
2. Lack of Comprehensive Tracking to Inform & Refine Marketing Efforts
If a brand’s primary success metric for its co-op marketing program is the amount of co-op ad dollars spent, that’s a problem. Again, if partners are spending promotional allowances with unspecified MSPs marketing over disparate channels, good luck aggregating and making sense of the results.
Even if all MSPs are preapproved and in the same partner portal, the results they send back to partners will be scattered across multiple dashboards, pdfs, hidden in emails, etc. The point is there is no automated retrieval, aggregation, and centralized visualization for both partner and brand of all the simultaneous marketing programs. Without such reporting, how can brand or partner properly evaluate what is working? No refinement occurs, a “results by volume” approach is unconsciously assumed.
Best Practice: There are two things the brand has to measure, (1) partner participation in brand supplied marketing programs, and (2) the impact of the actual marketing programs themselves. A co-op marketing system that’s a component of a larger local marketing software or brand management software (whatever you want to call it), will take this double analytic bottom line into account.
- To evaluate program enrollments and spends, the fund manager mechanism should be able to tell in real-time: funds used by partners, funds that have been used on any particular program or asset, unused fund balances, and fund expiration dates.
- At the same time, marketing program results should be visible when compared with one another. (i.e. Is triggered email working better than local display advertising, or is direct mail with call tracking outperforming a landing page effort? What combinations are synergistic?)
- For local partners, centralized reporting is less confusing, it lets them know what is working, and in turn eliminates the ambiguity between dollars spent on marketing vs. marketing return on investment. This ambiguity feeds partner apathy – less ambiguity with proven marketing tactics that produce ROI for partners yields more proactive marketers at the local level.
- For brands, the double analytic bottom line and a flexible co-op marketing tool gives fund managers the control to draw attention to the most productive programs, to increase partner enrollment in those programs through adjusting fund incentives.
3. Weak Internal Promotion
Some brands and manufacturers get so obsessed with creating their customer facing campaigns, they forget to promote the programs internally to achieve maximum enrollment. These announcements should be made over multiple channels and repeated to make sure that they are delivered, understood and acted upon.
Best Practice: The corporate strategy should be clearly understood by local partners. Practically, that means communicating the purpose of each actionable marketing tactic or campaign and how that fits into the overall strategy. Encourage your local partners to see themselves as part of the team that will lead to mutual success.
So take a close look at your co-op / promotional allowance program and double check that your current practices have the best interests of your local partners in mind!
About the Author
Gary Ritkes, President of SproutLoud, oversees all Business Development and Marketing for the company. Gary, a pioneer in the emerging vertical of Distributed Marketing Technology, is an industry leader and innovator with 20+ years experience in graphic communications and marketing strategy. Gary has been involved with SproutLoud since the inception of the company. Prior to joining SproutLoud, Gary was VP of Marketing for Rex Three, Inc., SproutLoud’s first and largest vendor among its network of providers. He has served many Fortune 1000 clients and worldwide advertising agencies in providing marketing technology direction and optimization. He was an original founder of U.S. based Earth Color Group and co-founder of Advanced Digital Services (ADS), which was sold in 1996 to publicly traded Katz Digital Technologies. He has served as a board member of the local chapter of the American Advertising Federation chapter and other national industry associations, including the DMA and AGA.More Content by Gary Ritkes