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Guest post by: Andy Marken Become an Author

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The increasing cost of "buying into the market" continues to rise for manufacturers and distributors alike. More than 20 presidents and heads of marketing expressed this complaint as we developed background information to forecast what changes would evolve in the years ahead for their companies’ communications activities.

In talking with the heads of media trade associations, there was a consistent theme: it’s easy to see where these firms are heading by looking at the talent they are currently attracting.

More and more organizations are drawing senior level personnel from the high-volume consumer firms. And these people are, in turn, influencing the emergence of what appears to be two separate and distinct types of advertising: corporate/product and co-op.

Corporate/product advertising is concerned with long-term image building and product awareness. There is no doubt that manufacturers will continue to place a high priority on presenting themselves and their products favorably. Of even greater interest to dealers, however, is co-op advertising, which is becoming increasingly available through manufacturers.

Now that a more consumer-marketing mentality has stepped in, there's an increased awareness of advertising accountability within many organizations. Accountability refers to knowing whether or not the advertising pulled inquiries and sold/moved goods immediately as opposed to having to wait six to eight months for research studies to be returned to the dealer, distributor and manufacturer. As a result of this growing awareness, changes are already occurring.

These changes will come about in an area that has previously been one of the best kept secrets of the advertising industry ... co-op advertising.

A number of suppliers are already making changes in their co-op plans to ensure that the programs are more easily understood and that the funds actually get used. Plans will continue to be easier to read, simpler to use and will do more to help, rather than restrict, the retailer.

Adding impetus to this change is the change media is making to ensure that they gain a greater share of the co-op advertising pie. The media associations and their members are making a concentrated effort to ensure that all of the funds available are used by the dealers throughout the country in all industries.

The greatest reason for the change is the economic environment. The cost and waste involved in television advertising – national and cable – is becoming almost intolerable--even by major automotive, health care and food firms.

Another major reason for the change is that life is becoming increasingly easier for the co-op advertising supplier because of the very product you are attempting to sell. Better computer systems and more powerful software are now making it possible for organizations at every level to get an overall picture of what they need to know. This includes what markets are doing best; which kinds of stores are making the most use of co-op dollars; which stores are using the funds most effectively; what stores need assistance; what media is most effective in various areas around the country; and what media is getting most of the co-op money.

According to the editors of Technology Marketing and AdWeek magazines, there is a new realization that simply offering a product is not adequate, nor is it enough to pour excessive millions into national advertising to ensure a producer’s success. Technology Marketing stated that these two items are essential, but that there is also a new ingredient--an awareness of the manufacturer's customer ... the dealer.

"The consumer and computer electronics products – hardware and software – as well as the selling process are too complex to label today's retail organizations as just dealers or retailers," they commented. "They are really personal/home consultants or business consultants, depending upon the target markets they are pursuing."

Getting Started
Most dealers avoid using co-op advertising (it is estimated that 80 percent of the money is used by 20 percent of the dealers) because they either don't know how or because they feel it is too complicated. Or, they don't feel they have enough dollars accrued to make the effort worthwhile.

Consider the following recommendations:
* Assume that co-op funds exist for all of the products you
carry. Even if the company doesn't have a formal plan, it should
still provide co-op dollars if you convince them your
advertising will sell their products (if it doesn't, both of
you will be wasting money).

* Keep a file of all available co-op programs. Post a calendar
that shows purchase periods and expiration dates of the
program. Jot down seasonal promotions during which a
manufacturer may double or add more co-op contributions.

* Don't be fooled into thinking that just because you make only
small purchases, little co-op help is available. Remember,
some manufacturers will share ad expenditures regardless of
how much you purchase. They view such expenditures as good
for you ... and them.

If you'd like to get more information on co-op advertising, there are a number of sources. The Radio, Television and Newspaper Advertising Bureaus all have excellent literature on the subject. Contact your local media representative and have them obtain a copy for you.

Media Associations
The Advertising Checking Bureau (ACB); the Television Bureau of Advertising (TvB); the Radio Advertising Bureau (RAB); and the Newspaper Advertising Bureau (NAB), as well as others are involved in helping to force and formulate change. They predict that manufacturers will pay more attention to what the retailer needs rather than simply attempting to force products through the distribution channels as competition for dealers become more intense.

One change, which is already taking place, is the broadening of media eligibility for co-op. This includes weeklies, regional business publications, pre-prints, outdoor, statement enclosures, free circulation papers, shoppers, exhibits, direct mail, seminars, ezines, localized cable channel opportunities, user clubs and similar activities.

Many dealers, even those who don't already use advertising agencies to help them develop and execute their advertising plans, have stated that if they present their programs and rationale to manufacturers in a professional manner, the opportunities are limitless. One dealer stated that
manufacturers used to be rigid, but there's a new awareness that the retailer--who must reach and influence prospects in a specific market area--has a better idea of where and how to reach these prospects than does the manufacturer.

This new awareness is illustrated by another trend ... in their ongoing effort to be of real assistance, the manufacturer' and distributors' sales people are helping dealers decide where and how to spend and use their co-op dollars.

According to industry trade association spokespeople, the move toward increased use of co-op advertising is inevitable because of the changes that have occurred in the level of responsibility and authority for co-op advertising. Historically, co-op advertising was the responsibility of the assistant advertising manager or--worse yet--a marketing clerk. Today, the vice president of advertising, marketing and sales (and at times even the president) is becoming involved in the programs. They realize that no firm in the industry can hope to win simply by outspending their competition. Instead, they have to gain a greater share of the dealer's attention and make the dealer more effective in his or her specific market area.

Company Awareness
Officials at Sony, Canon, Microsoft, Pinnacle Systems and other firms agreed with one company official who said, "I know it sounds a little pretentious for an industry that is still so young, but in the old days co-op was something we used to buy our way into a retailer's location. National advertising was what we used to pull the products out of the store."

Here again, changes in responsibility affected the evolution. Advertising and marketing management are now the driving forces in the industry rather than designers and engineers. These people, especially those with solid backgrounds, realize that the marketing and sales success of the
company requires both push and pull--pushing the product into the retail outlets and pulling it out the other side.

And to help maximize this push/pull effect, several corporations will be presenting both standard co-op programs as well as customized programs which will actually place the advertising in target local and regional media rather than having the retailer make the selections.

National consumer and business publications such as Sports Illustrated, People, Time, Business Week, Fortune and others are developing a major push in this area. They're working with manufacturers to develop advertising programs that "localize" the ads. The publishers of these publications have found that the programs have been so successful in other business and consumer segments that in a very short time the more progressive and aggressive hardware and software producers will also be carrying out similar programs.

According to a different type of publisher--a software publisher--firms such as his are clearly showing developers and "writers" that they can each do what they do best to benefit all parties. "We are packagers and promoters," he stated. "Across the board, industry allocates over $20 billion annually to co-op funds; and less than half of it is ever used. We encourage our retailers to use all, or nearly all, of these funds because we understand it is cheap advertising for both parties. And it moves the product by building immediate demand and sales at the level where it counts ... the local level."

Similarly, some manufacturers not only give lip service to co-op advertising, but are even hiring two advertising agencies. One is responsible for corporate, product and image advertising while the other is responsible for co-op advertising.

By amortizing the production of quality print, radio and TV advertising over a broad number of retail organizations, both the manufacturer and dealer are left with ads that are customized to the specific dealer. The ads are far more professional than the dealer could ever hope to get from his or her local TV, radio, or newspaper salesperson.

One agency head, who specializes in co-op advertising almost exclusively, said that few retailers--except for major chains--would spend $200,000 to $300,000 for a series of radio and TV spots and local gravure ads that would run for three months or less and then be retired. However, by doing the ads for 50 to 100 dealers across the country, and providing them exclusivity in specific market areas, everyone has advertising which is economical and something they can be proud of. But more importantly, the advertising gets results.

In addition, these agencies will be responsible for developing the "selling packages" for the manufacturers' and distributors' salespeople.

One manufacturer felt that the day of the salesperson who simply called or stopped by to find out how many more units, how many more cases, or whatever was needed would soon come to a
dramatic and welcome end.

According to this individual, in the near future, the agency will be developing the selling packages and the manufacturers' or distributors' salespeople will be working as consultants to the dealers.

After going over the program with the retailer and finalizing the program that is best for that store, that location and that period of time, they would present the program to the store's sales force, explaining how it can and will help them sell/move product. Finally, the manufacturers' or distributors' salesperson will help put together the tie-in, in-store promotion to make certain the entire package works as a singular unit.

Industry and trade officials emphasized that about 20 percent of today's dealers already know that co-op advertising is not just cheap advertising for them (probably because they come from other consumer-oriented retail backgrounds). They're well aware that by complementing the co-op programs with their own programs, they can build not only short-term volume sales, but also a level of long-range company identity.

Professionalism at All Levels
Several manufacturers see the upgrading of dealer co-op advertising as the next generation of professionalism. The entire industry (manufacturers and distributors alike) is no longer so myopic that they believe they can simply sell product to the dealer and walk away.

The new co-op programs will increase the synergy that both parties want and need. Manufacturers and distributors will provide product/marketing expertise and guidance as well as planning and execution assistance at the senior level. Dealers will provide the customer feedback and research, market understanding, and daily sales.

All parties will spend more money--much to the satisfaction of all media. But that money will be more effectively spent to benefit all parties.
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