Locally owned hardware retailers experienced a 3-10% increase in sales in 2017, with much of this credit being due to the use of available co-op financing. These retailers purchase from hundreds of manufacturers that offer official cooperative financing, based on sales volume. Generally, the funding obtained is based on the sales of the previous year from their distributor or wholesaler of hardware, such as True Value or Ace Hardware.
With hundreds of brands represented, the funding process is streamlined by offering retailers financing based on the total sales of all products in a single payment, instead of separating individual products or manufacturers. This approach gives retailers the freedom to include any warehouse product in ads, eliminating the brand exclusivity typically required for the use of co-op funds. Retailers can take advantage of cooperative financing opportunities with products purchased directly from the manufacturer, such as barbecue grills, hardscapes, garden and lawn equipment, and fixed cooperation programs for items such as hand tools.
"The MDF only speaks to those who ask for it."
Jeremy Stout, marketing director of Middleton Building Supplies at LaValley in Rutland, Vermont, says co-op funding is integral to maintaining and increasing annual marketing dollars. Co-op funds represent approximately 30% of LaValley's annual marketing budget, distributed among 10 hardware stores, several modular home businesses and their pine sawmill. The biggest cooperative delivery for Stout is that MDF (Manufacturer Development Fund, or funds exceeding official cooperative funds) only addresses those who request it. He is constantly negotiating with the manufacturers' representatives for additional funding.
The key to successfully accessing these funds? Be prepared, have a marketing plan with a specific need and use it for additional funding. Stout notes that often the limits of co-op financing are unclear. Since many manufacturers use automatic rebates as a cooperative repayment method, these funds do not often return to financial results. Despite all its successes, LaValley still estimates that 30 to 40% of available funding remains unused. Often, the totals are simply not enough to offset the investment in a marketing campaign or they simply are not aware of the funds available. Stout focuses on brands offering high margin, revolving, or sales formal cooperative programs in product categories such as Windows, Doors, Roofing, Decking and Cabinets.
True Value's owner of Big Value, Adam Broughton, reported double-digit sales growth in 2017, with co-ops contributing 35% of its total annual marketing budget. The funds are mainly used for radio, television, advertising inserts and direct mail. With the addition of Broughton's son to the company, they are now exploring digital marketing opportunities via social media marketing. True Value funds make up the bulk of their cooperation funds found through True Value's assistance using the print inset program 12 times a year. Direct marketing for True Value Rewards customers is incredibly effective for Broughton. With this rural area, Big Country has found its marketing niche by doing its own voice-over work on radio and television, and focusing on campaigns that offer brand-compliant ads with the message "Why not the big box". Broughton offers a wide range of outdoor power equipment, including the Cub Cadet tractors and mowers, with brand marketing support. Big Country has become the largest distributor in the region, and Broughton attributes this success largely to their co-operative marketing campaigns, which include direct mail, flyers, and radio and television purchases.
The success cycle of cooperatives
Bottom Line: Co-op funds are an integral part of expanding marketing budgets, resulting in increased sales. With the funds of manufacturing cooperatives, hardware retailers have achieved several goals. First, through brand-compliant advertising media, the retailer's local message embraces the style, form and feel of the brand's national advertising message. Second, by making more publicity with the support of co-op funding, the retailer has become an integral part of the "Co-op Success Cycle". If you publish more, you increase store traffic. The increase in store traffic leads to increased sales. The increase in sales leads to an increase in the manufacturer's purchases, which translates into an increase in co-op funding for more advertising!
Now is the time to contact your hardware resellers and discuss a strategic marketing plan using cooperative funds, based on the previous year's sales for their 2018 marketing. Spring has arrived and the Hardware retailers will use these funds to offset their marketing investments through advertisements that include outdoor food equipment, outdoor painting, decks, garden tools and accessories, landscaping materials. etc. Enter new perspectives and close by using the cooperative value proposition. Schedule appointments with existing customers and double sales last year by making sure your customer is aware of any co-opportunities that are available to them.
We often meet retailers and hear the chorus: "We use all our cooperative financing." From my experience, this is true, you use all the cooperative financing you know. There are often opportunities for unexplored funds because the retailer simply did not know that the funding opportunity existed. By working with a media outlet with a full-time Coop department, they will be able to explore all available opportunities and share that information with the retailer. Additional totals can be found with calls made directly to the directors of the manufacturer's cooperative. You can access the content, obtain pre-approvals from the manufacturer and help the administrators to ensure that the retailer has the necessary documents to claim the refund, such as proof of execution, proof payment form and any other application forms required. With nearly 67% of manufacturers now accepting electronic claims, filing a cooperative claim can be as simple as attaching the document to PDF and sending a single email.
The opportunity of coop is huge. Enter the dollars!