OK, if you read yesterday’s post and you did your homework, you should now have thousands of dollars in OPM to use for your marketing. More likely, you have a small balance available, especially if you use a supply house. Those bastards like to use manufacturer’s money to go on fishing and hunting trips with their “Platinum Level” accounts. But don’t worry, we will get you on one of those trips soon enough! Today I want to talk about some of the benefits to co-op besides the bucks, cause it isn’t always about the Benjamin’s.
First of all, you need to know how co-op benefit you:
- Well, it allows you to tie in with national ad campaigns
- Co-op gives you credibility through recognized brands that consumers look for everyday
- Co-op gives you a larger marketing budget to work with
But how does it benefit the manufacturer? And “who cares” isn’t an answer!
- Co-op gives them local exposure that they need because it becomes more granular and more measurable compared to their national campaigns
- Recognized brand names in ads help you sell more of their crap, which means more money to them
So how does it all work?
Well, let’s first talk about Participation. Participation is the max portion of the ad cost that the vendor will reimburse. This is almost always limited to the amount you have ALREADY banked in the fund. Let’s say, if you have all your ducks in a row, they will cover 60% of the ad out of what you have available to use.
Then there is the Accrual Amount. This is the amount you have “earned” or “banked” based on a percentage of your total product purchases.
So let’s rock some math…We will use 50% participation with 2% accrual as our example:
What this means in English is that the manufacturer will reimburse or pay up to 50% of the ad cost based on your total amount banked. The amount banked is based on your total volume in dollars multiplied by 2%.
To calculate the accrual:
Product purchased: $100,000
Accrued amount: $2,000 (100,000 x 2%)
Purchased ad: $3,000
50% participation: $1500
Amount reimbursed: $1,500 w/ $500 still banked
So, now you know the what, where, when, why and how much. Now get a jump-start on your advertising for this spring and start marketing your construction business before those dollars expire!