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Finding cash for co-op activities isn't as easy as in the past, but distributors willing to work with their vendors to develop mutually profitable marketing programs can still tap into this valuable resource. Here's how.
Let's take a quick multiple-choice quiz on the state of co-op funds in the electrical wholesaling industry. Which of the following choices is true?
a) Co-op funds can be an indispensable resource that distributors can use to fuel promotional and marketing activities that create demand for vendors' products,
b) Co-op funds are underutilized.
c) Manufacturers see coop funds as a necessary evil.
d) The use and abuse of co-op funds is starting to attract attention from legal authorities.
e) All of the above.
Surprisingly, the answer is "all of the above," and that's what makes co-op funds one of the most confusing conundrums in the electrical wholesaling industry. The concept of co-op advertising, where a vendor gives a distributor funds to be used for specific promotional or marketing activities intended to create demand for that vendor's products, isn't new. In fact, co-op funds were used more than 100 years ago in the retail business and have been popular in the electrical market for decades.
But with their use has come abuse. Hank Bergson, president, National Electrical Manufacturers Representatives Association (NEMRA), Tarrytown, N.Y., sees the value in the use of co-op funds to create product demand. In his many years in the electrical business, he has seen plenty of abuse, too.
"It has to drive product off the distributors' shelves to a satisfied enduser customers," Bergson says. "It all depends on how the electrical distributor perceives his co-op advertising dollars. Does the distributor perceive that as another profit center, and that it doesn't have to be spent on co-op?
"Distributors have come to expect the co-op dollars. If it's dealt with like that, it's the same as rebates and all that other stuff. The manufacturer is forced to make a distinction if there is value received for the deployment ofthat resource, or if it's a price concession. At least half the co-op dollars are being spent as they are intended, and the other half are being diverted from their original purpose. If you add that up in this industry, it's...