When it comes to taking advantage of manufacturing marketing co-op funds, too many distributors are leaving money on the table. They’re focused on initiatives like raising prices rather than potential returns on the buying side. As a result, their co-op funds are haphazardly managed, untracked and going unused.
Distributors that get strategic with marketing co-op gain an edge with their suppliers. Those suppliers will invest because the distributor is more effective in getting a return on that money than their competitors.
We recently discussed a strategy for getting a return on supplier marketing co-op on our weekly live show, Wholesale Change. Having a strategy around marketing co-op will help you to optimize your product mix, supplier relationships, and develop a strong sales and marketing game that will make you invaluable to the channel.
10 Tips to Get a Return on Supplier Marketing Co-Op
Know where the co-op is coming from.
Co-op comes from supplier corporate funds, as well as local and regional funds. Many distributors don’t know where their co-op is coming from, and manufacturers struggle to control how it’s spent. Because of this, the money isn’t spent strategically and is squandered. Identifying the source of your funds is essential to an effective strategy.
Optimize your product mix.
Distributors tend to leave strategy out of their product lineup and supplier partnerships. As a result, they aren’t getting the best terms and conditions, pricing or rebates. Optimizing which products and suppliers you’ll carry is the first step toward concentrating your spend.
Conduct line reviews to leverage spend.
When you want to introduce a new product, and you have several prospective suppliers, put out an RFP that outlines what you’re looking for in terms of product coverage and support for logistics, marketing, sales and customers. Then, let the suppliers bid for your business. This will help you find the most optimal supplier relationship, affecting everything from pricing to rebates and co-op. Then, do regular line reviews. But be careful. Know your channel power, which suppliers provide most of your volume, and how great the demand for a product is. For example, if you are a small distributor and your supplier is large, the supplier will have the channel power.
Have three tiers of suppliers.
Divide your suppliers into three tiers: strategic, secondary and tertiary.
- Strategic suppliers are most important to your customers, have the best terms and conditions, and are committed to growing with you. Drive purchasing volumes to them. In most cases, you will have only one strategic supplier in any category.
- Secondary suppliers are important but not as important as those in the strategic tier.
- Tertiary suppliers are those you buy from only when you can’t buy from strategic or secondary suppliers, or when a customer asks for that brand.
Use strategic purchasing agreements (SPAs).
You should have SPAs with all your key vendors to maximize price, rebates and co-op funds. For instance, you should put a basic minimum level of marketing co-op in every SPA, even for small suppliers. A little bit of money from a lot of different suppliers can add up.
Build annual plans with strategic vendors.
When you have annual planning sessions with your strategic vendors, you get to lay out your separate objectives and align your efforts to be more successful. Your engagement shows them you’re invested in their growth. Because you have more control over demand generation than manufacturers, presenting solutions that account for their goals, as well as yours, will encourage them to invest co-op funds.
Develop a marketing plan with company-wide buy-in.
Involve leaders from across your company in developing a marketing plan. Host a planning summit for this team and assign leaders to different marketing efforts, such as ecommerce or events. Give any skeptics the strategy they’re least fond of. Often, this helps them understand its value and they become champions and spread their support where they have influence. A company-wide buy-in to your marketing plan will reach your suppliers and instill confidence in you for them.
Conduct an annual supplier summit.
Host all strategic and most secondary suppliers for an annual summit and deliver your plans for the next year in terms of events, merchandising, sales collateral and support, online training, ecommerce and more. This further instills confidence, and you can get their co-op commitment to support your plans. Do this every year. Incorporate reporting into the annual event. Reporting helps you prove you deserve the funding and are generating returns.
Involve suppliers in promotions and discounts.
When you involve your suppliers in promotions, you’ll:
- Get reimbursed by the supplier.
- Get special pricing vs. your competitors.
- Show the supplier you’re effective with promotions and marketing.
- Learn which suppliers will come to the table with you.
For the clearest exchange, create discounts and coupon codes to track purchases and discounts for reimbursement. That reimbursement is co-op money. The supplier is paying you to discount their products and, in exchange, you’re handing the discount off to the customer. It’s clean and fair because you must sell the merchandise to get these co-op dollars. You’re also incorporate marketing efforts.
Use supplier resources.
Suppliers offer many resources apart from co-op funding, such as training, technical support, marketing support and joint calls. These are valuable to distributors. If you’re not using them, know that your competitors are.
Don’t leave money on the table by letting your co-ops grow wild and untamed. Nurture – and structure – your supplier relationships, and get strategic so you can generate returns that make your partnership indispensable.
Watch our take on getting the most from marketing co-op in this episode of Wholesale Change: