Do You Know What Your Co-Op Program is Really Costing You?

Do You Know What Your Co-Op Program is Really Costing You?

It’s ironic that traditional Co-Op Advertising — originally designed to save Brands and their Local Partners money on local marketing — actually costs more than you may think. Think about what your Brand spends on Brand compliance, managing approvals and assisting Partners. Every dollar and every minute spent on Co-Op counts. When you look at the hard costs, soft costs and productivity costs that Brands incur to launch and maintain a Co-Op Program, it becomes increasingly clear that traditional Co-Op is too complicated and too expensive.

Hard Costs of Co-Op

Hard costs are tangible, expected and easily quantifiable. When it comes to Co-Op Programs, Brands often think of the budget they have set aside for Co-Op Programs.  However the Co-Op budget is just the tip of the iceberg.  Other hard costs of Co-Op include claims processing fees, the cost of vendor management, handling escalations, and the administrative costs of accounts payable, accounting and legal.  And, according to our research, the majority of Brands say that less than half the money they make available for Co-Op actually gets used by their Local Partners. This adds another layer of costs to Co-Op, because many Brands are spending money for a robust program that only half their Partners use.  Some hard costs that may be killing your budget are:

CLAIMS PROCESSING

With only 50 percent of Partners participating, here’s what a typical Brand and its Partners would spend to handle 10,000 Co-Op claims per year:

  • $160,000 per year –  Claims Processing (about $16 per claim, all-in)
  • $75,000 per year – prorated internal cost for Vendor Management
  • $85,000 per year – prorated share of internal Marketing, Finance and escalations of claims issues

Now most Co-Op claims run about $200 on the average.  That means in this scenario you could be spending as much as 16% of your budget on pure administrative costs.

INCOMPATIBLE SYSTEMS

If you are currently using a Digital Asset Management system and an Ad Builder and multiple marketing vendors for print and digital and a Co-Op Claims Processor – you are spending a lot of money on solutions that don’t work together.

ADVERTISING APPROVALS

In an effort to safeguard Brand identity, Brands dedicate headcount to receiving, reviewing, denying and approving Partner requests for Brand approval on local marketing.  Hard costs for advertising approvals are dedicated purely to manual processes than can easily be replaced through automation.

Softs Costs of Co-Op

In addition to hard costs, Brands also incur soft costs. These are costs that don’t always show up in a line item on the budget, but nonetheless have a significant impact on what Brands spend – or waste – on Traditional Co-Op.

LACK OF ANALYTICS

Without analytics to reveal your ROI, your Brand may be blindly investing in the wrong things. Imagine that you have put a newspaper offer in market for Partners and  50% of your network adopts it.  Success right?  But because you have a tough time getting analytics from the local vendors, what you don’t see is that the newspaper ad delivered a lower ROI than a social advertising campaign that was adopted by fewer Partners.  So regardless of successful adoption, you might be losing money by funding ineffective tactics.

LACK OF BRAND INFLUENCE OVER PARTNER BEHAVIOR 

Even if you are able to get analytics, you have to remember that Partners are independent.  They often decide what to invest in regardless of what the Brand thinks.  Without a way to influence their behavior you might be funding campaigns that deliver less than stellar results.

LOST POTENTIAL INVESTMENTS FROM PARTNERS

Our research suggest that only about 50% of Partners participate in campaigns and that less than 50% of Co-Op Funding is even used by Partners. In a prior company our Co-Op Budget earmarked for Partner campaigns for 2014 and 2015 was $24M. In each of those years like clockwork, there would be $12M left over.  Our average Co-Op offer was 75%.  That means that we lost $4M in potential funds invested by Partners due to lengthy approvals and an antiquated Co-Op claims process.

Productivity Costs of Co-Op

The long wait for reimbursements, the lengthy approval process, and the effect it has on Partners to repeatedly pay out of pocket for Brand marketing — all of these factors involve costs that aren’t necessarily calculated in the cost of a Brand Co-Op Program. But their impact is undeniable.

ADMINISTRATIVE COSTS

If you have headcount dedicated to overseeing vendors, approving advertising and handling claims escalations you are wasting a lot of headcount and talent on administrative work.  We know that digital advertising has the potential to put the exact right message in front of the exact right segment.  But most Brands don’t have the creative horsepower to develop content for all their potential segments.  So, in essence, your manual processes are costing you the ability to speak to customers in a way that might drive them to buy.

PARTNER SALES 

Selecting an offer, customizing the ad, waiting on approval and filing reimbursement claims all take time.  Lots and lots of time.  This tedious administrative work takes Partners away from what they really should be focused on — building relationships with customers.  It is clear that the technology choices you make not only affect people in your building, but also the Partners you depend on to create revenue.

The Next Evolution of Co-Op: Simple and Cost-Effective

Traditional Co-Op is so broken that it’s clearly time to evolve. The key is to keep it simple:

  • Cut Costs with Evolved Claims and Reimbursement.
    SproutLoud cuts Co-Op claims processing costs by up to 50 percent. Such a significant savings on administrative costs gives Brands the freedom to reallocate those dollars on Brand Marketing campaigns focused on driving traffic, leads and sales.
  • Centralize Systems Compatibility.
    SproutLoud delivers the technology and structure needed, so Brands can use SproutLoud as a central point for managing Co-Op across their entire Partner network.
  • Embed Brand Compliance and Make the Approval Process Obsolete.
    SproutLoud offers Digital Asset Management, Ad Builder technology and Dynamic Templates, where all available customization options are already Brand-compliant. Then, Brand-compliant tactics are automatically routed for execution with our integrated best-in-class Marketing Service Provider network.
  • Deliver Real-time, Relevant Analytics.
    SproutLoud delivers performance metrics on every campaign, allows Partners to compare tactics and evaluate messages. It also serves to increase Partner participation, because your Partners will be able to see the value of local Brand marketing.
  • Give Brands Greater Control to Incentivize Co-Op Spending.
    SproutLoud gives Brands greater control to pre-set rules that automate and customize the allocation of Brand Co-Op dollars throughout the Partner network. Brands can predetermine on a granular level who gets how much, what they can spend it on and when. All of this is done in a process that’s faster, more efficient and more innovative than ever before to strategically align funding with the Brand’s marketing goals.
  • Get Partners Investing With You.
    By utilizing SproutPay Instant Funding, Brands can simplify local marketing for Partners and provide funding instantly, as soon as they launch the ad, with no potential for fraud or ineffective use.  All campaign operations are centralized on the SproutLoud Platform. Partners create, fund and launch Brand-compliant campaigns from a single SaaS portal.  And all execution is handled by SproutLoud and our world-class ecosystem of Marketing Service Providers (MSPs), which are fully vetted, monitored, best-in-breed marketing vendors that are integrated into the SproutLoud Platform. This ensures that every dollar Brands and their Partners invest is spent on effective, Brand-compliant campaigns.

When you consider the real cost of Traditional Co-Op, there’s no question: You can’t afford NOT to upgrade to the latest Channel Marketing Automation solution.

 

About the Author
Gary Ritkes

Gary Ritkes, President of SproutLoud, oversees all Business Development and Marketing for the company. Gary, a pioneer in the emerging vertical of Distributed Marketing Technology, is an industry leader and innovator with 20+ years experience in graphic communications and marketing strategy. Gary has been involved with SproutLoud since the inception of the company. Prior to joining SproutLoud, Gary was VP of Marketing for Rex Three, Inc., SproutLoud’s first and largest vendor among its network of providers. He has served many Fortune 1000 clients and worldwide advertising agencies in providing marketing technology direction and optimization. He was an original founder of U.S. based Earth Color Group and co-founder of Advanced Digital Services (ADS), which was sold in 1996 to publicly traded Katz Digital Technologies. He has served as a board member of the local chapter of the American Advertising Federation chapter and other national industry associations, including the DMA and AGA.