Going to war, cooperatively

If you're scrambling in search of money to develop marketing programs, here are some tips to help you get more co-op funds from manufacturers.

by David Gordon

Doing business is like doing battle. You need to use all of the weapons at your disposal, identify ways to bring more firepower to your side and develop allies who support your interests. In business today, manufacturers are your allies and co-op marketing funds provide the added firepower you need to win more marketing battles.

Your goal should be to receive a disproportionate share of a manufacturer’s sales, marketing and financial resources, while also delivering on their expectations of you. Through cooperative marketing strategies, leading distributors and manufacturers utilize each other’s strengths to take market share. Distributors bring customer contacts, local knowledge and a commitment to work with the manufacturer. Manufacturers bring product and application knowledge, sales skills and marketing tools to bear on each situation.

Like in battle, taking market share requires that you take key positions one at a time. A good, profitable distributor generally has a substantial position in a market segment, selling a broad mix of products to that segment. So the question becomes, do your co-op expenditures help you increase your share?

To make money, you need to be dominant in something. To become dominant, you need a plan. For the past few months, you have been developing sales objectives with your key manufacturers. In most cases, these goals need strategies to ensure achievement. But implementing a plan takes resources, and that is where co-op funds are useful.

Think like a manufacturer
Manufacturers offer co-op marketing dollars to help defray the cost of local marketing efforts. Why?

1) Manufacturers want distributors to assist in the manufacturers’ marketing efforts, providing the local touch (manufacturers don’t have the foggiest idea how to motivate your customers).

2) By providing funding, manufacturers seek ways to capture a greater share of mind from distributors and their customers.

Think about which manufacturers you consider to be marketing-oriented companies. Do they offer co-op programs? Look at the distributors who are known as marketing-oriented companies. Do they partner with key suppliers? Do these companies have above-average growth? Do you think these distributors fund 100 percent of their marketing expenses?

Effective marketers define what they want to do, identify who benefits from the strategy, solicit support from key suppliers, execute and evaluate. Between co-op marketing funds, marketing development funds, training budgets and sample budgets, 50 percent to 75 percent of your non-personnel marketing budget should be manufacturer supported.

You earn co-op dollars based on your purchases from specific manufacturers, which offer co-op dollars to help you sell their product. Not every manufacturer offers co-op funds (but either these companies are good marketers, specified manufacturers or are commodities).

Why do manufacturers offer these funds? Because they want you to promote their products via promotions, merchandising, training events or similar activities. Each company’s earning structure, eligible marketing activities and reimbursement process is different. That being said, if you peform the following steps, chances are you’ll improve your chances of receiving more co-funds from manufacturers.

Steps to take
1) Develop a spreadsheet that outlines all of the co-op opportunities your suppliers offer.

2) Ask manufacturers for a marketing contact at headquarters so you can become more familiar with their tools. This provides you with a marketing resource.

3) Ask what promotions/marketing tools your manufacturers have available. While they may not tell you what they will offer (product or awards), they do know when they will offer something. If your rep doesn’t know, ask him to find out.

4) Develop a marketing calendar, based upon your goals within each market segment you serve.

5) Involve manufacturers to determine how they can help you.

6) Finalize your tactics, including what you plan to implement, in which market, with which manufacturers and how to fund the strategy.

7) Use all possible earned dollars from every manufacturer that generates at least $100. Once you use your allotment, if you still want to do a marketing activity with them, ask for more. Historically, manufacturers pay out 30 percent to 60 percent of their co-op accruals, meaning many distributors do not claim their funds nor conduct marketing activities. Would you mind using your competitors’ funds?

8) Keep track of program performance. Manufacturers invest in you if they know that you deliver. A manufacturer’s No. 1 concern regarding co-op marketing is return on investment. If you deliver for the them, they will deliver for you.

9) Play fair. Everyone knows the tricks companies use, and everyone expects them. What manufacturers want, however, is fairness in promoting them and responsible usage of their funds.

A typical $20 million distributor should have access to a minimum of $72,000 in co-op funding. Is that enough for some type of marketing effort? You bet. While many co-op programs require co-investment, these are dollars that if you do not use, someone else will.

Market development funds (MDF)
Market development funds are the marketer’s and manufacturer’s answer to stimulating growth.

Obtaining market development funds takes work. It requires:
• understanding your needs, your customers’ needs and your manufacturers’ needs
• developing a marketing plan
• being flexible enough so that you can sell, implement and deliver results, and
• selectivity among those manufacturers most important to you.

MDF programs focus manufacturer and distributor efforts and create closer working relationships between parties because each becomes vested in the outcome.

An MDF approach is effective when the distributor develops a marketing plan and leads the planning process, inviting selected manufacturers to participate with the distributor in a coordinated marketing strategy.

How to use co-op funds
Many industrially oriented distributors lament the fact that marketing to industrial customers does not offer as many opportunities as marketing to contractors. There is more focus on price and performance than promotion.

Marketing, however, can identify techniques to assist in the sales process. You must capture mindshare to capture market share. Here are some co-op program ideas:

Frequency programs. Yes, we mean like the airline-type programs. The goal is to focus on account retention and loyalty. Rather than award merchandise for personal use, consider training, charitable donations, tools, business equipment (computers, televisions, VCR/DVDs) off-setting capital improvements (repaving a parking lot, tables for the cafeteria, etc.), discounts for services or future purchases. Go to www.clubextralite.com to see how an electrical distributor has developed a program to appeal to contractors and industrial customers.

Group travel. Definitely a no-no, right? But what if you offered your customers an exclusive training opportunity, bringing in top speakers (funded by manufacturers), and customers could earn their attendance at the meeting? A few years ago, for a client that sold to lighting designers for large retailers (The Gap), we developed a program where the retailer earned attendance at a Palm Beach meeting with extensive educational and networking opportunities.

Web conferencing. Have you participated in an online training session? Today’s technology makes it easy for a manufacturer hundreds of miles away to provide training to your customers. Invest in a multi-seat license from Placeware (www.placeware.com) or Webex (www.webex.com), and ask manufacturers to co-fund the license. Commit to a number of customer training sessions per manufacturer and have the manufacturer get someone from the factory to conduct the presentation. This also works for distributor sales training. Groups of distributors in the electrical industry currently use this technology. Visit www.vnaweb.com/manufacturers and www.vanguarddistribution.com/supplier.

Relationship management events. No, not a golf outing. Every manufacturer salesperson wants to know your customers better. Invite five to 10 couples from targeted customers to local events. Vary the events so you can invite people based upon their interests. Involve one or two manufacturers per event. Let the manufacturer be involved in the account targeting/inviting. Consider events like plays, symphony, sporting events, horse shows.

Newsletters. Manufacturers can provide support for print and electronic newsletters. They may help fund production of these newsletters in return for placement of product information and articles. For industrial customers, e-newsletters are becoming more prevalent. For an e-newsletter, consider a source like MarketPro (www.taylormmg.com), which manages the entire process, provides a template for your newsletter and will work with you in developing the manufacturer content. In the electrical industry, many manufacturers have endorsed MarketPro as a co-op tool, and it takes a distributor less than 30 minutes to develop a newsletter.

Services. Guaranteed, manufacturer-specific, in-stock programs are effective industrial marketing tools for distributors. Manufacturers typically help produce the brochures, provide spiffs to salespeople and allow any delivery expenses to be applied to co-op funds.

Branding. Yes, there is a role for hats, shirts, golf balls and signage, however, this should not exceed 25 percent of your marketing.

Catalogs. Manufacturers have always contributed to print catalogs, but how about developing market-specific and customer-specific e-catalogs, using manufacturers’ current catalogs? Linkpath (www.linkpath.com), represented in the U.S. by BtB Marketing (www.btbmarketing.com), offers a unique service where a .pdf becomes searchable, and can be linked to your online ordering system. For an example, go to www.flukecanada.ca.

Manufacturers are willing to invest in distributors that are focused on growing their business. This year, like last, distributors are focused on taking share. With a decreasing pie, it is imperative that distributors seek ways to be aggressive and to differentiate themselves from the competition. To take share, partner with key suppliers and bring in the troops.

This article originally appeared in the March '03 issue of Progressive Distributor. Copyright 2003.

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