Advertising cooperatives: Not the same as co-op funds

Advertising cooperatives are a different beast altogether. Unlike co-op funds, advertising cooperatives cost you money. But it may be the best money you ever spend, because you enjoy high-quality production and your fair share of the clout of a substantial combined media budget.
Advertising cooperatives (also known as dealer ad groups) are common in the franchising business and the automotive business. The franchise business discovered a long time ago that it can do a much better job at advertising if it asked each of its franchisees to pony up a percentage of gross sales, which then goes into a “war chest” where it accumulates until enough cash is available to do a large-scale media buy for all the franchises together. An individual store can’t hope to do advertising on a scale to match the combined budgets of many stores. Strength in numbers is the name of the game.
The advertising cooperative also uses its money to employ the services of an ad agency that produces top-quality TV, radio, and print advertising, as well as in-store, point-of-purchase display materials, and, in the case of food franchises, menus, banners, bags, and so on. If you’re in a business that can take advantage of the media buying power and quality production provided by an advertising cooperative, be sure to get involved. Your business will most likely benefit.

Submitting your co-op claims package

After your ads have run and your campaign is attracting customers in droves, all you need to do is submit your co-op claims package. Your package includes your preapproval form, your proofs of performance, and a written request for reimbursement of the promised percentage of the campaign.
Continuing with the paint store example from the beginning of this section, imagine that you’ve made the requested changes, the ads run, the campaign is a success, and hundreds of people with questionable color sense fight their way through your doors. The Putrid Peach paint is history. Now you just submit the entire package — the signed preapproval form, the notarized media invoices, the notarized radio scripts, the CD or MP3 file of the finished radio spots, and the newspaper tear sheets — to your supplier along with your written request for reimbursement.
There. Wasn’t that simple? Now all you need to do is wait for the co-op check to arrive in the mail. And, what’s the bonus to all of this hoopla? You got rid of that disgusting paint color!

Obtaining proof of performance

After you’ve made the manufacturer’s requested changes to your ads (if there were any), you need to make sure to get what’s called proof of performance from the media, which is really just verification that you ran the ads as you said you would. 

To return to the paint store example from the preceding section, when you buy your ads from the radio station, advise them that you’re using co-op funds (they usually know precisely what information you need). Make sure you receive the following verifications and co-op information with the station’s invoices:

• A notarized copy of your finished script listing the number of spots run and the total dollar amount those spots represented in your total media buy. If you’re using more than one script, each script needs to be notarized with the above information.
• A notarized or certified invoice listing the run times of each spot, the title of the script for each spot, and the total dollar amount of the buy. Advise the newspaper how many tear sheets you need to provide for the manufacturer (tear sheets are copies of the actual printed page on which your ad appeared — the manufacturer lets you know how many you need to provide as proof of performance). The newspaper provides those tear sheets along with its notarized total invoice. (For more on newspaper ads, check out Using Print Ads.)

The media you’re working with should know what your manufacturer needs as proof, but if not, be sure to ask the manufacturer. The proof of performance looks different for every medium.

Getting your ads preapproved

Manufacturers don’t just hand out co-op money as if it were candy. You can contact a manufacturer about a potential co-op ad campaign, or a manufacturer may contact you and suggest one. But before you can begin to spend any co-op money (no matter whose idea it was), you must get your ads preapproved by the manufacturer you’re working with.
Suppose you own a paint store. One of your major manufacturers has told you that it will co-op an advertising campaign to sell 1,000 gallons of Putrid Peach paint it has lying around. Your supplier tells you that, if you contribute some of your ad bucks ( you pick the amount you think you’ll need to dispose of this paint within a reasonable amount of time), it’ll match you 100 percent up to $5,000. Your total ad budget could, therefore, be $10,000 — more than enough to buy some local radio time and a couple of big ads in the newspaper.
Your next step is to get your ads preapproved by the manufacturer. In most cases, your supplier requires you to have all your advertising preapproved by the factory to make sure it adheres to the manufacturer’s co-op guidelines. Your supplier may have an approval form for you to fill out. Along with this completed form, you must submit copies of radio scripts, a CD or MP3 file of the final produced commercial(s), and at least a rough layout (plus a copy of the final, finished copy) for your newspaper ads. ( Be sure to ask what your manufacturer requires for various mediums.) Then the manufacturer’s advertising or marketing department either sends you a stamped approval as is or advises you to make certain changes. The department may also simply advise you of the required changes and stamp and sign the approval “Approved with changes.” Be sure to follow the manufacturer’s co-op rules and guidelines carefully, making whatever changes they request.
Never run co-op advertising without first obtaining signed preapproval from the supplier.

Understanding the Rules, Regulations, and Restrictions

Each of your suppliers has a unique set of rules to which you must adhere in order to collect even a dime of co-op funds from them. The rules and restrictions set up within co-op programs can be so complicated that you may wonder whether these suppliers want anyone to even try to collect. But even though the restrictions can be a bit off-putting, if you follow the rules to the letter, your suppliers will reward you with either some extra cash to invest in advertising or some additional merchandise with which you can make a big, fat profit. All in all, the pain is worth the gain.
If you work with an ad agency, it may be able to help you navigate the rules and regulations. For example, my agency deals with several clients who count on co-op advertising funds to either augment or completely provide their advertising budgets. Because these accounts have hired my agency, we do all the work of collecting the funds for them. It’s one of the services we provide, and we do it month after month for multiple accounts (each with different rules of collection). Collecting co-op funds can be time-consuming, but if you know the rules and follow them, you can do it without much trouble.
When you’re working on your own, without an agency, you need to do the legwork yourself. In the following sections, I walk you through the process of using co-op funds — and collecting your money.
Co-op funds may be earned (and accrued) over a specific period of time and carry with them a deadline for use. This deadline is known as “Use it or lose it.” Make sure you find out about any deadlines imposed by manufacturers on the use of their available co-op advertising funds, and be sure to spend the money before it disappears.