Channel Dynamite: Why You Should Blow Up Your Co-Op Strategy

At the center of every Channel Marketing campaign is funding. Committing marketing dollars to your Channel is the best way to engage and motivate your Partners. But traditional Co-Op and MDF programs are so broken that it’s time to just put it aside. In fact, 75 percent of local businesses don’t participate in Co-Op, because they aren’t sure whether these programs are good investments, according to a recent report by Gleanster Research. But, today, there are new technologies that can help Brands reduce fraud, increase Partner participation and amplify the power of every dollar they spend with Partners.

The Co-Op Model is over 100 years old. While you wouldn’t want to drive a 100-year-old car or eat a 100-year-old piece of cake, Brands are still using Co-Op Advertising. Why? It couldn’t be because anybody actually likes it. Every year, only about 52 percent of the $70 billion that Brands invest in Co-Op advertising gets used, according to Gleanster. That’s right — Partners are looking at $33 billion of free money and saying, “No thanks. I’ll pass.” The fact is, it is a horrible way to do business. Before we set the charges and prepare to blow Co-Op to smithereens, let’s discuss how we got here.

To protect themselves from unauthorized advertising and fraud, Brands set tight controls on funding. First, the Partner has to select an offer. Brands usually promise to pay a portion of a marketing program if the Partner pays the rest. To make sure that the Partner is spending the money correctly, the Brand creates extensive guidelines that outline every aspect of how to build a Brand-compliant ad. If one part of the guideline is missed or misunderstood the Partner’s ad is rejected. This means more work for the Partner, of course, but don’t forget that this is hard work for the Brand, too, as a pre-approval queue grows with each campaign selected. Making sure that Brand funding is being spent on Brand-compliant ads is a big deal.

Once the Partner gets the approval, they would like their money please. But it doesn’t work like that. The Brand says I can’t give you the funds until I know the program ran. As tough as it is to admit, historically, there has been a lot of fraud in the Co-Op world. Brands aren’t going to release Co-Op funds until they verify that they got what they paid for — even though they haven’t actually paid for it, yet. So, the Partner fronts the Brand the money and pays for the entire program themselves. Connecting funds directly to programs and avoiding fraud is a must.

After the program has run, the Partner submits a reimbursement claim to try to get the money the Brand promised. This usually goes through a claims processor and can take four to six weeks. If we are going to change the system, then we have to think about the speed of funding as a major issue to be resolved. The sad truth is, as a recent report from Gleanster Research notes, 57 percent of local business owners who opt not to use Co-Op find the process difficult.

Let’s recap:

  • Co-Op is difficult to get approved.
  • It requires the Partners to pay the full cost of ads upfront.
  • It takes a whole lot of paperwork.
  • It doesn’t actually get the reimbursements to Partners for almost two months.

Yeah, I say we blow it up. But first, we have to create a system that solves all these challenges. Let me introduce you to SproutPay Instant Funding.

With SproutPay, Brands attach funds directly to campaign assets in the SproutLoud platform. This ensures the dollars can only be used for a specific tactic. The only way a Partner receives those dollars is by advertising with the Brand-approved tactics available. This means there is no opportunity for fraud. And because each tactic is created in highly dynamic templates, the Brand doesn’t even need to approve each program.

As great as reduced administration will be for Partners and Brands, the most attractive feature of SproutPay is instant funding. Instead of waiting weeks for reimbursement, the Partner receives the funding immediately when they apply their portion of the campaign through the platform. The Partner simply selects a campaign, customizes it and executes it. The Brands funds and the Partners funds are automatically applied in real time to the tactic. No reimbursement claims, no denials, no waiting.

Finally, every SproutPay campaign tactic is fulfilled by SproutLoud’s Marketing Service Providers (MSPs). They are 40+ best-in-class execution vendors that handle virtually every type of campaign tactic — from Dynamic Digital Display and Pay-Per-Click Ads to Direct Mail and Print Ads. These vendors deliver the maximum impact for the tactic. MSPs are integrated into the SproutLoud platform. That means there is no vendor management for the Brand or the Partner.

And because this entire transaction takes place in SproutPay, there is no need for claims processing. Those funds can be reallocated to actually reaching customers. Fewer dollars out of pocket for the Brand and the Partner means more dollars into market.

SproutPay is a very disruptive concept that changes the economics of Channel Marketing. Eliminating the claims and reimbursement process drives down OpEx through the reduction of manual work. Since you don’t need a claims processor that charges $10 to $15 per claim, that money goes back into your marketing budget. Instant funding will also encourage more Partners to participate, amplifying the power of your investment anywhere from 20 percent to 70 percent. Finally, since all campaign execution happens through the platform, you get the best price possible on every campaign you launch. Lower operational expenses, no claims fees and more Partner participation in high ROI campaigns means you can look at Channel Marketing in a whole new way. And about Co-Op? Yeah, let’s blow it up.

Fire in the hole!

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