During my years in retail—both in the natural products industry and in mass market—I was privileged to work with hundreds of manufacturers on co-op programs. As a result, I am convinced that co-op is a valid tool to increase sales for retailers.
To me, co-op is short for cooperate. I believe that cooperation is the bedrock foundation of a successful co-op program. If the retailer tries to dictate to the manufacturer, or the manufacturer tries to dictate to the retailer, the results will be less than what they could have been. In a retail marketing context, the word co-op refers to the money that a manufacturer gives a retailer to support sales-building activities—usually advertisements in fliers or magazines, in local newspapers, on the radio or in other media.
The goal of co-op is to increase sales for a specific brand (or specific parts of a brand) at a specific retail store during a specific time frame. That's what makes it beautiful to both retailers and manufacturers—it is a program that is 100 percent trackable. You can see what gives you results.
A retailer who is not doing any co-op-driven promotions might wonder how to get started. Begin by making a list of the brands on your shelves that are key to your success. These might be brands that are exclusive to your store, those with a history of success in your store, brands you carry because you believe in their quality or brands that have very strong customer demand. With this list in hand, you should then find out what your purchases of these brands have been for at least the last few months. If you can calculate both unit sales and wholesale dollar volume for the previous year or two, that would be even better. If you don't have a point-of-sale system that will provide this data, you can probably get it from the distributor or vendor.
Be aware that none of these manufacturers "owes" you any co-op money. Some choose to grow their brand by spending their marketing money in other channels. Others focus completely on other activities, such as training, education or sampling. Of those that do support retail efforts via co-op, there is no rule about how much money they will spend with you. Five percent of annual wholesale purchases is a fairly common number in our industry, but I have seen many brands spend more. Be aware that even brands that are generous with retail spending might not invest a lot with you until they see that your program increases sales of their products.
To develop a conservative starting number, total your annual purchases from these top brands and calculate
From there, you need to present your co-op marketing concept to reps for your top brands and work with them to get good products at good prices featured in whatever program you put together. We'll cover more details about that part of the process in my May column.
Bill Crawford, director of retail publishing programs at New Hope Natural Media, spent 12 years on the management team of a major natural products chain. Contact him at [email protected]
Natural Foods Merchandiser volume XXVII/number 4/p. 21