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On today's episode of Grow Live, Matt Johnson and Renia Carsillo unravel the confusion around manufacturer Co-Op programs. Discover the do’s and don'ts of Co-Op requests, and get inspired to dream up your own unforgettable campaigns where everyone wins.

Watch, listen or read now and learn more about:
  • Using your Co-Op dollars the right way
  • Co-Op requests your suppliers don’t want to see
  • How to make Co-Op magic taking traditional marketing to the digital world
“By working together, creating something useful for the customer, everybody can win,”—Renia Carsillo, Director of Digital Strategy at SMS

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Today’s call to action:

Do you have experience managing a Co-Op program for your distributors? What works and what doesn’t? Share your thoughts in the comments below!

We have some uber tactile advice for next week, so don’t forget to tune in. We’ll dish on how to dominate LinkedIn in as little as 5 minutes a day.

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Renia:

In this week's episode of Grow Live, Matt schools me on how to use your co-op dollars, so tell us how you're using yours in the comments below, and look for some great new ideas throughout the show.

Matt:

I don't know what I'm talking about.

Renia:

Welcome back to Grow Live. We're excited to be back with you this week. We're going to talk about something that I don't understand at all today, so Matt's gonna enlighten us and help us all figure it out, right?

Matt:

Wow. No pressure.

Renia:

Yeah. We are here today to talk about co-op, and how to get those funds approved so you can do some awesome marketing ninja techniques. Welcome back. We're glad that you're here with us. If you're new to us, you can watch us here live on Facebook, watch us back in beautiful HD if you want to see us in HD. Scary. Scary.

Matt:

You do.

Renia:

On YouTube. You can also listen to the podcast, and you can read the transcripts if you don't know what we're saying right now or want to have our words of wisdom for all time. You can find all those different ways to watch the show at GrowWithSMS.com. Please leave us a comment, let us know how you like to watch the show. We always want to know kind of where you're getting things from, and-

Matt:

Yeah. Please comment on the Facebook Live video. You can do that right now. You can do it later. Come back and do it later at your convenience, or on YouTube. We'd love to see your comments and thoughts. We'll definitely respond to those quickly, and we'd love the conversation starter, for sure.

Renia:

Yeah, and if you're new, and you don't know us, by the way, I am Renia, the Director of Digital Strategy here at SMS, and I'm back with Matt Johnson, our CMO and Managing Partner, and we are here to talk all things industrial marketing, right?

Matt:

That's right, and that's why this is a very popular topic. It's actually a very confusing topic, so you kind of threw down the gauntlet for me in terms of explaining this. Well, guys, even though I've been in this industry for 15 years and I've done industrial B2B marketing. I'm still confused about co-op, and so I'll do my best to explain some things, and hopefully we can spark some creative ideas for you guys about how to use co-op, if you're a distributor, if you're a manufacturer, how to create a co-op program that makes sense, that actually gets used, so yeah. I'm excited to share some of these thoughts with you, but it's for sure a confusing area. I'm not gonna promise any enlightenment. If anything, we'll just have a conversation about it together.

Renia:

What if we start off with an easy question? How about that?

Matt:

Awesome.

Renia:

What exactly is co-op?

Matt:

Co-op essentially is a way for original equipment manufacturers, OEMs, to participate with their distributor partners by funding a part or all of their advertising initiatives. Just to kind of explain that in simple terms, your manufacturers will help pay for your marketing, and it comes in lots of different forms, but in a very simple way, that's the way to understand it, is that most of your manufacturers, if you're a distributor, have some sort of co-op program or agreement in place which will allow you access to certain funds. Typically, the way that it works, Renia, is that manufacturers will pay back in terms of credit. It's almost always credit. It's very rarely a situation where they give dollar for dollar for your marketing-advertising, but it's usually a percentage credit of your total annual sales. If I do $200,000 in sales with a particular manufacturer, their co-op program might be 1% or 2% of those total sales, so that percentage would equate to a real dollar amount. I can't do the math in my head right now, but that dollar amount would be what you would have available to use and spend on your own marketing for the year.

Renia:

Awesome.

Matt:

Is that clear as mud?

Renia:

Yeah. I think of it sort of like a cash back program on a credit card.

Matt:

Yeah. Okay. Kind of like that.

Renia:

It's simple. It's something I can understand.

Matt:

Yes. Yes. The more you spend, the more marketing co-op dollars you have at your disposal.

Renia:

Awesome. In an ideal world, how would you use those co-op dollars? How do you get them back in a way that makes sense for both of you, both parties?

Matt:

Right. In an ideal scenario, your distributors would identify their top performing brands. Who do you spend the most with? Usually there's the old 20-80 or 80-20 rule applies here, so there's usually 20% of the brands that you carry as a distributor account for 80% of your revenue, so I would start looking at those brands. Who are they, and what are their co-op policies? Starting off there by identifying that, and then once you have those identified, you would ideally have a marketing strategy for the year planned out, or at least quarterly, that involves bringing in those key supplier-manufacturer relationships. By doing so, you can communicate with them that, "This is what to expect. Here's the campaign we're running. Here's how you're going to be featured in that campaign." Or in that project, because sometimes it's a catalog project or a web project. But ideally, that would be all planned and communicated with the manufacturer ahead of time, so that they can expect it, and so that they can improve it quickly. That's an important piece of that from the distributor perspective.

Renia:

Oh, so you mean I can't go back and ask for it after the fact?

Matt:

You can, but that's when it gets a little sticky, so we'll talk about ... Yeah. I think we're going to talk about some of the ways ... We'll call them "co-op fails," so some of the ways that co-op is not done the right way, but for a manufacturer, on the flip side of this coin, you want to make sure that this is all communicated ahead of time and that you have tools and policies in place that make it easy for your distributors to actually run marketing co-op campaigns, because a lot of the times manufacturers are really great at making products, but not so good at creating marketing materials. There's a real need for marketing support at the manufacturer level. Some of them do it really well, and those tend to be the brands that get focused on at the distributor level, and others don't. Even though they may make an amazing product, typically they're not going to get in front of the end user, because the distributor just doesn't have any material.

Renia:

It sounds like this program could kind of be a match made in heaven if it runs well, but there's maybe a lot of potholes, so does it usually run really well? How have you seen these things work out?

Matt:

It really doesn't run very well. It typically does not run well. It's usually a situation where distributors leave a lot of co-op that's available to them out there that never gets used, so that's unfortunate. Very few distributors actually plan out ... I know this is shocking, but very few distributors are actually planning a marketing campaign ahead of time, so they don't ... Our distributors do, the ones that work with SMS, because we kind of ask them to build out a strategic plan for the year, and we run 90-day epic campaigns, but most distributors are not doing that, especially your small to medium-sized independent distributors. They just don't have the resources. Usually the marketing manager, if there is one at those companies, are scrambling, doing 12 different things at a time, so they don't have the resources in place to actually build out a strategic plan that involves their suppliers, and so they're not communicating those efforts. Anything that they do is usually kind of off the cuff, and unplanned, unscripted. That's on the distributor's side, that's one of the issues I see.

Renia:

And you said that they kind of leave dollars on the table, so there's typically a certain time that they have to use these by?

Matt:

Yeah. Yeah. Every manufacturer has a different policy in terms of how and when you can use your co-op dollars. Unfortunately, some of the manufacturers intentionally, and I'm not going to name any names, but some manufacturers intentionally make it difficult for distributors to actually use their co-op dollars, so they'll put really strict guidelines in place in terms of when you can use it, how you can use it, and I know why they do that, but when you look at a complicated agreement like that, it becomes difficult if you're a small or medium-sized distributor, to actually want to pull off a campaign and do the work necessary to get those co-op dollars.

Renia:

Yeah, and those are usually like ... I see in my one fall in this, that they tend to expire towards the end of the year.

Matt:

Yes.

Renia:

So that's why this planning upfront is so important, right?

Matt:

Yeah. It's always, "Use it or lose it." Absolutely. That's why like most things in business, it comes down to having a very good plan, and communicating that plan both internally and with those suppliers, manufacturers that you have relationships with.

Renia:

You said a lot of companies have ... Or not a lot, but some companies have really strict rules about this, and I'm wondering if that's because of some of the ways that it's maybe been handled poorly. Why don't we start with the bad, and then we'll help everybody clean it up and give them some suggestions on what they could do that's good.

Matt:

Yeah. I mean, it would be very easy, and of course if you're a distributor out there, you're probably blaming the manufacturers for having ridiculously difficult co-op programs, and a complicated approval process that requires multiple people to get involved, and strict approval guidelines. You may be frustrated by that, and I understand that completely, because it is frustrating, especially if you're a marketer, and you're just trying to get something done, and you're just looking to offset the cost a bit on the project. However, the reason why ... Now I'm going to step over and kind of join my manufacturer friends. The reason why it is so oftentimes a complicated process, and the reason why they safeguard those funds is because, Renia, like you kind of alluded to, they often get misused, and they get misused and abused, and we've seen some crazy things.

 

Sometimes co-op funds are used for golf tournaments, parties, stress balls. I think that's my favorite one. Tchotchkes, giveaways, pens, t-shirts, things that you know as a marketer are like, "Okay, I get it. I understand why you're doing it, but what real value is that going to create in terms of driving business for my brand? How is my brand going to move forward with those things?" A lot of the times, distributors are just not creative with how they're using co-op funds, and they're not putting the intentionality and the effort into creating campaigns that actually work. Therefore, manufacturers have been slow to approve and have put a lot of boundaries around their co-op programs.

Renia:

You're saying that the box of t-shirts in my office from 1995 is a bad idea?

Matt:

Yeah, probably. You can go that route for sure, and I understand that it's a simple, quick and easy win, and it's a way for you to use up co-op dollars. I also think that what happens is distributors end up getting towards the end of their expiration time to use the co-op dollars, and they're just like, "How can we quickly use $1,000? Oh, I know. Let's buy some shirts." I understand why they're doing it, but you see how this is creating this weird cycle of distributors not using it right, and then manufacturers getting tighter and tighter with those funds.

Renia:

Oh, I see. What could we all do to be better? Let's start with maybe our distributors. What could they do to use their co-op more effectively, so it helps them win and their manufacturers win?

Matt:

There's lots to be said about this, but I really do believe, and I've actually seen it done a few times, and we're trying to do more and more of this, but I believe there are ways to do co-op marketing so that everybody wins ultimately. The end user wins, the distributor wins, and the manufacturer wins in this whole strategy.

 

Here are some ideas, I guess, on both ends. On the manufacturer's side, I would like to see more companies create co-branded content that their distributors can use, and campaigns for that content to live inside. It's one thing to create, for example, a catalog or literature sheet that a distributor can add their logo to. I think some suppliers do a good job of that. I would say that's the first step, and really those tools are excellent for distributors to use, and I encourage manufacturers to have some sort of catalog program or literature program that can be customized, because it's nothing that's more easy for a distributor than to create some branded literature sheets, brochures, or catalogs that they can give to their sales team, and it's all of the products that the manufacturer sells, and they can get it to their customers with their branding on it. That's tremendous. However, I believe that we could do a little bit better.

Renia:

Okay. I like it.

Matt:

Yeah. I actually have seen a couple of examples of this. I'll just point out one, because I don't want to bring in any other ... I don't want to expose too much here behind the scenes.
There is one, and obviously my family's other business, Accuform, does a great job of this. They actually create co-branded campaigns for their distributors that have a digital and traditional tie-in. An example of this is their Construction Express catalog. They created a catalog, a small catalog, it's only like 32 pages or something like that, and it can be completely customized for the distributor so that there's no Accuform branding on it. It's just the distributor's branding, and it's got all of those products that are relevant to that particular vertical, and then they have a tie-in landing page where you can send people to so that they can view those products in detail, they can access some resources, a white paper, and that sort of thing. It really ties in. It's a complete industry vertical campaign, and it's specific to that manufacturer. That is really cool, and that's the kind of stuff that distributors love.

Renia:

Hashtag #Tradigital.

Matt:

Yeah, it's tradigital.

Renia:

I love it. By working together to create something that's useful for the customer, both sides can win.

Matt:

Yeah.

Renia:

It sounds like that's what you're saying, is that it's not just about, "Oh, let me use my dollars." Or, "Oh, let me keep my dollars." It's about working together to create something that's useful for the customer.

Matt:

To be clear, a program like Accuform's Construction Express campaign, they make that available as a resource and they don't charge their distributors, except if they wanted to customize it, they would charge them to customize it. But where they would consider even going a step further is if you were to feature that campaign in, say, a social ad on Facebook, or a blog article, or an email campaign where you're sending out multiple emails to your customers about this particular brand and this particular vertical. That's something that manufacturers love to see, and very few distributors do it. Believe me, your manufacturer partners out there would absolutely be thrilled if you told them, "We're going to do a social campaign featuring your brand. We're going to do an email workflow, and we're going to have a landing page with lots of resources, where our customers can learn about your brand, your products, and the solutions that you provide." That's the ideal scenario. Very few pull it off, but when they do, everybody's happy.

Renia:

It sounds like this is something that could be a reoccurring sort of template, though. If you invent it or create it once, you could use it over and over again, right?

Matt:

Absolutely. This is something I really want to drive home, because this is about a distributor taking the time to build out a co-op campaign strategy for their brands, for their supplier brands. This can be repeatable. For example, here's how you can imagine this looking. You could work with your manufacturer to have them use their co-op dollars, your co-op dollars, sorry. See, this is why co-op is so confusing. But use your co-op dollars in working with your manufacturer to build a landing page on your website, to make sure that the most popular products are on your website first and foremost, and building out that landing page so that it's got links into product pages, so that it has educational content. Most manufacturers are now getting to the point where they're realizing, "I need to help educate my end users. I need to nurture the sales process. It's not enough just to create product content." Going to the next step and providing a landing page of resources in addition to the product information helps move the buyer through that buyer's journey, whether they're ready to buy or they're just looking at solutions.

 

That's really important, and of course, you can come alongside that landing page in a whole universe of ways, creatively, to do that, right? To drive traffic from your customers and prospects to those landing pages. You could run a social ad campaign, which have been really effective on Facebook, driving awareness to that landing page. You could send out an email workflow to your customer, so a drip campaign, if you will, where it's a series of emails that go out to your end users explaining a particular vertical or product category. Of course, that would feature your manufacturer brand that you're working with, and blog articles, and also additional social highlighting as well. All of these things can work really nicely, Renia, to drive awareness of that brand, and that manufacturer would be thrilled to have you guys build that for them, and they would happily pay for at least a portion of that campaign with your co-op dollars.

Renia:

It sounds like that would be a really advantageous thing for a distributor to do, because one of the things we know with where we're losing a lot of people on e-commerce is that we're just using boilerplate content that every other distributor has, so if you work together with your manufacturer to create something that's unique, it really should help you move that needle a lot.

Matt:

There are so many creative things you could do with your manufacturer, and identifying those vertical markets that you're looking to penetrate better, and identifying cross-sell opportunities, where for example your customer may not know that you sell signs, or they may not know that you sell flame-resistant clothing, and they don't realize that you could be their supplier for that category. This is a great opportunity for you to reach out to your manufacturer or rep and put together a campaign that's going to drive awareness for your customers in that product category.

Renia:

If this sounds really kind of overwhelming to me, can you walk us through a couple of steps? What would we do first, second, third, to make something like this come to life?

Matt:

Yeah. I guess kind of breaking this ... I didn't plan to talk about this, but I'll help you out here.

Renia:

I love to ask you questions that aren't on the script.

Matt:

This is the live show portion. Thank you very much. The idea here is that first and foremost, you're asking as a distributor, right?

Renia:

Yeah. Absolutely.

Matt:

As a distributor, the first thing I need to do is identify my top suppliers, the brands that I like to work with, the brands that I know do a good job in marketing themselves, and so I'm going to first look at that. I'm going to actually let the numbers drive that, so I'll take a play out of your book, Renia, and I'll use the data to help me inform that decision, in terms of where I have the best opportunities.

Renia:

Can I ask you a question about that?

Matt:

Yeah.

Renia:

I think that absolutely, the data of who we work the most with, who we have the most sales with, but it seems like if you're trying something that's kind of new-ish like this for you, you might want to pick a company that their values align closer to yours, like what they're trying to do that year, or the way you guys see the world, or whatever aligns you a little closer. Cool.

Matt:

Totally. Totally. There's so many ... In our space, industrial supply, there's so many suppliers, and most distributors do just what you just said. They work with the brands that they align with. It's not just purely a monetary or a business decision. There's more nuance than that, so yes. Finding... educating yourself about what their co-op policy is. I would put all of that in my first step. Finding those manufacturer brands, getting educated with the co-op policy.

 

The second step is, based on that information, I would put together a campaign template, kind of as we were just talking. It might be a package that you offer to your manufacturers, like, "Option A, you get a landing page and an email every quarter. Option B, landing page, blog, email. Option C, landing page, blog, social ad," et cetera. You can build it up in increments so that your suppliers can kind of choose at what level they want to participate, and many suppliers may even pony up additional funds outside of your co-op dollars to participate in those marketing activities, because they will see the value of a distributor who's out there grinding just to promote their brand. That is kind of my step two, is to build out that campaign program, and step three is to roll it out with your marketing team, and making sure that you execute on those promises that you said to your manufacturer partners.

 

Step one: Identify the brands that you want to work with. Educate yourself on the co-op policies. Step two: Create a plan. And step three: Execute. It's really as simple as that.

Renia:

Well, when you say it simple like that, it still sounds a little overwhelming to me. I mean, here's the set up portion of the show, but can somebody help me with this?

Matt:

Today's call to action is, if you are interested in putting together campaigns that are going to reach your end users more effectively, and the new buyer's journey, that is more digital than it ever has been, we encourage you to go to IndustrialMarketing101.com and visit that page, watch that video, and then enroll into ... Get access for our five-video series, which will help guide you into the ways of attracting, converting, and closing industrial end users. That's the first thing I would say, is go learn how to create marketing campaigns that your manufacturers would love to participate in. That's number one.

 

Number two is, if you have questions about how to run a co-op campaign if you're a distributor, how to build a campaign strategy and get it approved by your manufacturer partners, contact me or go to the website at GrowWithSMS.com, schedule a consultation. I will be happy to have that conversation with you in detail, as it relates to your business.

 

That's my call to action. Visit the IndustrialMarketing101.com, and if you want to have some more information, I'm available to talk.

Renia:

I love it. This week's topic, this co-op conversation, this is a pretty big one, and we're kind of layering it on top of a few big conversations we've had. We've talked about video, which I know can be overwhelming for a lot of people. We've talked about trade show marketing, which is big, giant setup. We thought next week, we'd give you a little bit of a break and give you something super tactile that you can do during the show or directly after, in less than 15 minutes. Does that sound like a nice little break for them, that would be super impactful?

Matt:

I love it. It's a great idea. LinkedIn is quickly becoming the network of choice for B2B marketers and sales reps, so you need to know how to navigate your way on LinkedIn, and do it in a way that can be added to your sales process without taking up hours and hours of your time. I think Renia's going to help you out with that.

Renia:

I am really excited about this. Next week, we're going to talk about the LinkedIn Five, which is a process for managing your LinkedIn account in 15 minutes a day that I've developed, actually, over the course of 10 years, and I've seen some really huge wins out of it, like multi-million dollar sales, and really cool stuff out of it, so we're really excited to bring this to you, because it's super easy, super fast. You can do it, like I said, while you're watching the show, while you're eating a sandwich, and start to see results from it right away. Super excited next week to talk about the LinkedIn Five, so if you're feeling a little overwhelmed by the big topics we've covered the last few weeks-

Matt:

Sorry about that.

Renia:

We're going to bring you something bite-sized for next week. We would love for you to leave us a comment. If you're watching on YouTube or Facebook, you can do that below, and tell us what it is that you do with your co-op dollars. What have you done that works? What have you done that maybe has been sub-optimal, that you'd like some help with? What's going on for you with this, this year? Because we know this is a really hot topic with everybody as they're planning out their campaigns for this year. Share with us. Let's get a little inside mastermind going in the comments, and see what we can come up with.

 

I think that's it, Matt. Are we good this week?

Matt:

That's it. I think we're good. We're actually on time this week, Renia, so let's not screw it up.

Renia:

It's amazing. I know. One minute. Countdown. Thank you, everybody, for being with us for Grow Live, and we'll see you next week to talk about the LinkedIn Five. Bye bye.

Matt:

Thanks for coming.

Renia:

Hey, everybody. Thanks for joining us. If you're just getting started with us on Grow Live, be sure to check out some of our favorite episodes in the show notes.

Matt:

And don't forget that you can see us live on Facebook every Wednesday at noon, or you can find us on YouTube and binge past episodes in full HD.

Renia:

If you found this helpful and you want to see more, leave us a review and we'll enter you for a chance to win some Grow Live swag. Thanks again, everybody.

 

 

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Topics: Grow Live, digital marketing, resources, industrial marketing, marketing tips, strategic planning, marketing tools, Co-Op

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