A tale of two co-op programs
Co-op programs are often seen as a necessary evil for manufacturers, and can be complex to say the least. If you’re reading this and have a hand in shaping or managing your organization’s co-op program, you’ve got your work cut out for you — and we want to help. Let’s start with something that might sound familiar.
A second-generation, family-run, single location dealer from Kansas won’t stop complaining to you about how they can’t compete with the 30+ location corporate giants down the road. If only you’d stop giving “the big guys” such a generous distribution of co-op funds, the Mom-and-Pop dealer would actually have a chance to compete. Or even better, if you wouldn’t be such a doormat and stop clearly showing bias in how many questionable, fringe requests slip through your approval process, it could actually level the playing field a bit. (You know this isn’t completely true, but their perception is their reality and you wish it wasn’t.)
Meanwhile, MegaCorp Dealer Group doesn’t see it the same way. You’re waiting at their beck and call and their version of the co-op program is hardly recognizable compared to how it was written in the standard guidelines. They have a 16-person marketing department and their hubris is palpable when they insist that they’d get better results with the co-op funds without all the guidelines, approvals and hoops to jump through.
Are they both right? Honestly, yes, sometimes they are. So, how do you juggle so many stakeholder needs with a single co-op program and how do you not end up in a situation where the tail is wagging the dog? After all, the co-op program is there to serve your business — hopefully you’re treating it that way. Let’s dig in to see how you stack up and where you might be able to make some improvements.
Strategic asset or liability
Let’s zoom out a bit to examine how co-op programs fit into the broader company strategy. Your co-op program can be a critical tool to assist with driving the company’s strategic priorities forward, and it is often overlooked.
I want to take you through a quick thought exercise to gauge your conviction in the purpose of your co-op program. First, ask yourself, “can I see a clear connection with the way we’re deploying our programs and where the business is headed today — and in the future?” Seriously, write the connection down or give it a bit of thought before moving on.
If you struggled to come up with legitimate answers and not some BS you’d be embarrassed to say out loud to your co-workers, here are some thought starters:
- Expanding Dealer Network: Our co-op program incentivizes new dealers to join our network by offering substantial marketing support and resources, making it easier for them to establish and grow their business with us.
- Testing Initiatives: Our co-op program supports dealers in experimenting with innovative marketing strategies, allowing us to gather data and insights to refine approaches and stay ahead in the market.
- Aligning with OEM Priorities: Our co-op program focuses on supporting key initiatives like launching new products or targeting new audience segments, ensuring dealer activities align with our top strategic goals.
- Market Penetration and Brand Awareness: Our co-op program leverages dealers’ local expertise to build brand awareness and penetrate new markets, establishing a strong presence where it matters most.
- Sales Growth and Promotions: We aim to boost sales and revenue by funding dealer promotions and offering incentives to increase product sales and market share.
- Dealer Support and Loyalty: Our co-op programs support dealers and strengthen relationships by providing financial assistance and resources, fostering loyalty and prioritization of our products.
- Consistent Branding and Messaging: We ensure consistent branding and messaging across all markets by providing co-op funds and marketing materials, enhancing brand identity and consumer trust.
This list isn’t exhaustive, but you can likely identify several ways your co-op is being, or could be, used to enhance both short and long-term business performance. Having the ability to clearly point to a specific purpose indicates strong alignment with your business, suggesting you likely have a strategic asset on your hands.
But when can your co-op program become a strategic liability? If your funds are allocated based on the loudest voices within your dealer base or sales team, you’re taking a passive approach at best. At worst, you’re reacting to a force that will continually demand more. There will always be a hot problem or issue to deal with. I am not suggesting structure equals good and flexible equals bad, but being reactive and deploying resources without clear strategic intent is what puts your co-op in the liability camp. Picture this scenario we have seen multiple times and how co-op can be used as a proactive asset versus a reactive tool to smooth over a problem:
One of your more prominent dealers has your products stockpiling on their lot for over 200 days — quite a bit longer than their average turn rate of about 90 days. The situation is getting expensive and everyone is stressing out. You don’t want this to cause strain on the relationship and introduce doubt when your dealer is set to place orders next time around. So what do you do? You don’t exactly have a standard in place for how to handle the situation, so you come up with some extra co-op dollars and send them to your dealer to let them know you’re there to help (once again pissing off that dealer in Kansas). It doesn’t necessarily solve the root of the problem, but likely helps reduce some friction and allows the dealer to decide if they want to pocket the cash or use it to try to move the product. Solid intent, but this is reactive, doesn’t scale, and is a missed opportunity to systematize a solution to a problem bound to present itself again.
Alternatively, you have seen this exact situation countless times and have a playbook for how to help. You have a sales and marketing campaign specifically designed to move aging inventory for your dealers and it is ready to take off the shelf. The campaign is already co-op approved, and in this situation you decide to provide a generous match to signal your partnership and build loyalty with your dealer. This approach recognizes market realities and can serve a dealer base with a wide range of needs and sophistication. You can point to how your decisions in this scenario have a clear strategic purpose, are proactive and can scale. This approach is better.
If you’re just going through the motions and maintaining a co-op program because you feel obligated to, without understanding how it advances your business, you’re missing significant opportunities. To be clear, I’m not suggesting you strangle your co-op program with endless rules and guidelines. There is a place for discretion, investing in partnerships and providing ad hoc support.
Be nimble
You can’t plan for everything. Flexibility and adaptability are key in managing a co-op program that caters to a wide spectrum of dealer needs. While it’s important to have a defined program with clear guidelines, it’s equally important to be nimble and responsive to unique situations and opportunities as they arise. Plan for the unknown and build repeatable solutions to problems as they arise. Scenario plan. This will allow you to be flexible and develop scalable solutions for the future.
A few suggestions to maintain agility in your program:
- Establish Clear but Flexible Guidelines: Create adaptable guidelines that balance discretion with accountability. This ensures funds are used effectively while aligning with your strategic goals.
- Encourage Innovation: Support dealers in experimenting with new marketing strategies. This fosters a culture of innovation and provides valuable insights to refine your approaches.
- Responsive Support: Be ready to allocate funds quickly for unexpected market shifts or opportunities. This helps you stay competitive and support your dealers more effectively.
- Regular Review and Adjustment: Continuously review your co-op program’s performance and make necessary adjustments. Collect feedback from dealers to ensure the program remains aligned with your strategic objectives and adapts to changing market conditions.
By maintaining a balance between structure and flexibility, you can create a co-op program that effectively supports your dealers and drives your business forward in a dynamic market environment.
Performance is everything
In the world of co-op programs, performance is the ultimate measure of success. If these programs don’t drive customers to dealers and move units, they will inevitably fail. It’s crucial to respect the investment that your dealers make. They’re putting their dollars on the line for your brand, and they expect a return. The effectiveness of your co-op program hinges on delivering visible, tangible results. If your program doesn’t produce a clear benefit, why would dealers continue to invest their time and money? The stakes are high — ensure your co-op initiatives are designed to deliver the outcomes that justify your dealers’ commitment and loyalty.
What needs to change?
If your co-op funds are being allocated based on who shouts the loudest or just to put out fires, it’s time to rethink your approach. Instead, aim for a program that proactively supports your dealers, aligns with your strategic priorities, and offers clear, consistent guidelines. This approach not only addresses immediate challenges but also creates a scalable model for future success.
Don’t let your co-op program be a source of frustration or a reactive crutch. Turn it into a tool that supports your business growth and strengthens your dealer relationships. What needs to change to level up your program?
Kyler Mason, President
