Click to Print

Co-Opportunities In Advertising

Here's where to find extra money to stretch your advertising budget.
February 1, 1996
URL: http://www.entrepreneur.com/article/21828

Each year, a substantial amount of advertising funds are made available to businesses throughout the country. As much as one-third of that money often goes unclaimed. Free advertising funds going unclaimed? Why?

The problem is three-fold:

1) Many small businesses aren't aware the advertising dollars are available.

2) Some businesses know about the funds, but don't know what they need to do in order to get their share.

3) Other businesses know about the funds and how to get them, but don't want to invest the time and effort required to collect the money.

What is this windfall? It's co-op advertising funds, money offered by manufacturers and other business entities to businesses who market those companies' products or services.

How Co-op Advertising Works

Suppose you operate a small appliance store. The manufacturers of certain brands you sell may offer co-op funds when you run ads promoting those products. You may even be able to obtain funds from local utility companies that want you to promote energy-efficient appliances. Electric and gas companies are also frequent providers of co-op dollars to contractors who promote energy-efficient products and services, such as "tune and clean" central air conditioning services and annual furnace inspections.

"In the beauty industry, particularly in retailing professional hair products in salons, there are dozens of co-op programs," says Patti Ferraro, owner of Paul Ferraro Salon Inc., in Boca Raton, Florida.

"The one we take advantage of in my salon is from Redken. For any and all advertising I do, whether it be direct mail, print or TV ads, birthday cards to my clients or balloons to decorate my shop, Redken gives me a kick-back in product. The amount of co-op I qualify for is directly related to the dollar amount of product I purchase in a calendar year."

If you're not already receiving your share of this veritable gold mine, you should be! Co-op advertising dollars can help stretch your advertising budget. And in addition to giving you money, these sources often offer help with advertising and marketing, such as supplying pre-printed advertisements or prepared radio and television spots.

You can take advantage not only of funding, but of the expertise and creative buying power of companies much larger than yours. The result is an association between your business and the prestige of a national brand. All it takes is a little knowledge and a lot of organization.

Getting Your Share

The first step in taking advantage of co-op funding is finding where the money is. There are three good sources of information:

1. Your suppliers. Suppliers and manufacturers' representatives will often volunteer information about their co-op funding programs, but not always. Ask each of the reps you deal with about any co-op funding that may be available and the steps you need to take to apply for it.

2. Advertising representatives. The sales reps at the newspapers and radio and television stations you advertise with may be familiar with sources of funding used by other clients, and may be able to point you in the right direction. Be alert, as well, to the ads you see and hear. Whenever a manufacturer's name is mentioned in a store's ad, you can be sure the store owner took advantage of co-op money.

3. Your business colleagues. What co-op programs are other businesspeople using? Find out from colleagues who operate similar businesses or from trade associations for your industry.

The second step is applying for the funds you qualify for. Vendors who offer co-op funding establish rules you must comply with in order to be eligible for co-op reimbursement.

For example, many co-op programs forbid putting competing merchandise in a co-op ad. Others require approval of your advertisement before it's run. Most co-op requirements include stipulations on the types of media that are eligible (i.e. newspaper advertising may be eligible, but not Yellow Pages ads).

After your advertisement runs and you've provided proof of your compliance with the program, you'll be reimbursed, typically in cash or credit toward future invoices, for a portion of the total advertising cost, up to a preapproved dollar value. For example, a vendor may offer to repay you for 50 percent of the cost of any advertisement run that meets the co-op requirements of the manufacturer.

There are many variations on this reimbursement scheme, so it's critical that you understand each program before you purchase your advertising. Also keep in mind that reimbursement from the vendor usually takes between 30 and 60 days from the time you submit your invoice and proof of compliance.

Making It Work

As you may begin to see, the more sources of funding you employ, the more complex it becomes to track, report and collect your share of the co-op pool.

Steve Fales, owner of AdServices, an advertising firm in Hollywood, Florida, says, "I've spent millions of dollars in co-op. It's pretty simple. You run the advertising according to the co-op guidelines and submit the claim, the proof of performance and a copy of the media invoice. Then the vendor pays their share. Some vendors send a check, others send a credit memo, others deduct from an invoice and some credit another part of the relationship."

It's the variations Fales refers to that can create record-keeping nightmares for small-business owners who want to make use of co-op funding.

How can you ease the frustration? First, be sure the value of any funds you apply for will exceed the time and effort necessary to qualify for them. Never apply for funds simply because they're available. If you would not advertise a particular product without the co-op funding, carefully consider whether it makes sense to spend even 50 percent of the advertising cost just to get "free money."

Second, carefully read and be sure you understand all the requirements of each co-op program you participate in. Set up a simple filing system for each program and consider developing a form that will let you "see at a glance" what the regulations are for each account.

Some of the items you may want to include on the form are the funding percentage offered, the total allocation, the method of reimbursement, which media qualify for reimbursement, any elements that must be included in the ad (e.g. manufacturer's logo, specific wording, etc.), and whether preapproval or proof of your compliance are required.

Third, put a reliable individual, such as yourself or a trusted employee, in charge of your participation in co-op programs.

Fourth, be meticulous in maintaining your records. Keep track of all correspondence, approvals, copies of ads, invoices, and so on. The time you spend here will save you frustration later.

Finally, know when the job has gotten too big for you. Many companies turn to outside agencies or service bureaus to coordinate their co-op advertising. That may be cost-effective for you, as well.

Lin Grensing-Pophal is a writer in Chippewa Falls, Wisconsin.

Pertinent Points

Once you've obtained information on various co-op programs, read the guidelines and regulations thoroughly. A complete understanding of the requirements of each manufacturer or distributor can help you avoid problems later. The pertinent points to look for are:

1. Qualification criteria

2. The type of media that can be used

3. The time period during which ads can be run (co-op funding requests are often turned down because ads were run at times other than those indicated by the manufacturer)

4. The size and length requirements for the ads (including the amount of space that must be devoted to the product and any special wording required by the manufacturer)

5. Regulations regarding the inclusion of competing products in the ad

6. Requirements regarding how the product should be described (some companies have strict wordage requirements)

7. Requirements related to pre-approval of the ad by the manufacturer

8. Whether reimbursement will be made for production or agency charges"I've spent millions of dollars in co-op. It's pretty simple. You run the advertising according to the co-op guidelines and you submit the claim, the proof of performance and a copy of the media invoice. Then the vendor pays their share."

"I've spent millions of dollars in co-op. It's pretty simple. You run the advertising according to the co-op guidelines and you submit the claim, the proof of performance and a copy of the media invoice. Then the vendor pays their share." - Steve Fales