Locally owned hardware retailers saw a 3-10% increase in sales in 2017, with much of the credit due to the use of available co-op funds. These retailers buy from hundreds of manufacturers that offer formal cooperative financing, based on sales volume. Funding obtained is typically based on the previous year’s sales from your hardware distributor or wholesaler, such as True Value or Ace Hardware.
With hundreds of brands represented, the financing process is streamlined by offering the retailer cooperative financing based on the total sales of all products in one lump sum, rather than breaking down individual products or manufacturers. This approach gives the retailer the freedom to feature any warehouse product in the ads, removing the brand exclusivity typically required in the use of co-op funds. Retailers can capitalize on co-op financing opportunities with products they buy directly from the manufacturer, with products like barbecue grills, building supplies, power lawn and garden equipment, as well as fixed co-op plans for items like hand tools.
“MDF only reaches those who ask for it.”
Jeremy Stout, director of marketing for Middleton Building Supplies of LaValley in Rutland, Vermont, sees cooperative funding as an integral part of both maintaining and increasing his annual marketing budget. Cooperative funds comprised approximately 30% of LaValley’s annual marketing budget at 10 retail hardware stores, several modular home companies, and its pine lumber mill. The biggest lesson from the cooperative for Stout is that MDFs (manufacturer development funds, or those funds above formal cooperative funds) only go to those who ask for them. He is constantly negotiating with manufacturers’ sales representatives for additional funds.
The key to successfully accessing these funds? Be prepared, have a marketing plan with a specific need and a use for the additional funding. Stout finds that the lines are often blurred on what cooperative financing is. Since many manufacturers use automatic rebates as a cooperative rebate method, those funds typically don’t go back into the marketing bottom line. With all of his successes, LaValley still estimates that 30-40% of available funds go unused. Often times, the accruals are simply not enough to offset the investment in a marketing campaign or they are simply unaware of the available funds. Stout focuses on brands with formal, high-margin, turnover, or sales cooperative programs in product categories such as windows, doors, roofing, decks, and cabinets.
Big Country True Value owner Adam Broughton saw double-digit sales growth in 2017, with co-op funding accounting for 35% of his total annual marketing budget. Funds are used primarily for radio, television, inserts, and direct mail. With the addition of Broughton’s son to the business, they are now exploring digital marketing opportunities through social media marketing. True Value funds include most of your co-op dollars found with the assistance of True Value using the print insert program 12 times a year. Direct marketing to True Value Rewards customers is incredibly effective for Broughton. With the rural location, Big Country has found its marketing niche by doing its own voiceover work on radio and television, and focusing on campaigns that feature brand-friendly advertising with a “Why not the big box?” . Broughton has an extensive line of outdoor power equipment, including the Cub Cadet line of lawn mowers and tractors, with brand marketing support. Big Country has become the leading distributor in the region, and Broughton attributes much of this success to its cooperative marketing campaigns distributed across direct mail order, inserts, radio and television.
The Cooperative Success Cycle
Bottom line: Cooperative funds are an integral part of expanding marketing budgets, leading to increased sales. With cooperative manufacturing funds, hardware retailers have achieved several goals. First, by having brand-compatible collateral, the retailer’s local message aligns with the look, feel, and feel of the brand’s national advertising message. Second, by advertising more with the support of cooperative funding, the retailer has become part of the “Cooperative Success Cycle.” If you advertise more, you increase store traffic. Increased store traffic leads to increased sales. Increased sales lead to increased purchases from the manufacturer, which then results in more co-op funds for more advertising!
Now is the time to reach out to your hardware retailers and discuss a strategic marketing plan that uses co-op funds, based on the prior year’s sales for your 2018 marketing. Spring is here and hardware retailers will use those funds to offset marketing spend with ads that include outdoor power equipment, outdoor paint, decking, garden tools and accessories, landscaping materials and more. Visit new prospects and close using the cooperative value proposition. Schedule appointments with existing clients and double last year’s sales by making sure your client is aware of all the joint opportunities available to them.
We often meet with retailers and hear the refrain, “We used up all of our co-op funds.” In my experience, that’s true, you use every cooperative fund you know of. Often, there are financing opportunities that have not been explored because the retailer simply did not know the financing opportunity existed. By working with a medium that has a full-time cooperative department, they will be able to explore all the opportunities available and share that information with the retailer. Additional accumulations can be found with calls made directly to the manufacturer’s cooperative administrators. Content can be accessed, manufacturer pre-approvals can be obtained, and administrators can help ensure the retailer has the proper documentation to claim rebates, such as proof of performance, proof of payment, and any other required claim forms. With up to 67% of manufacturers now accepting electronic claims, filing a cooperative claim can be as simple as attaching the pdf document and sending a single email.
The cooperative opportunity is huge. Sixteen dollars!