Locally owned hardware retailers saw a 3-10% increase in sales in 2017, with much of the credit coming from the use of available cooperative funds. These retailers buy from hundreds of manufacturers who offer formal cooperative financing, based on sales volume. Generally, funding obtained is based on previous year’s sales from your hardware reseller or wholesaler, such as True Value or Ace Hardware.
With hundreds of brands represented, the financing process is simplified by offering the retailer cooperative financing based on the total sales of all products in a single sum, rather than breaking down individual products or manufacturers. This approach gives the retailer the freedom to present any warehouse product in advertisements, eliminating the brand exclusivity generally required in the use of cooperative funds. Retailers can capitalize on cooperative financing opportunities with products they buy direct from the manufacturer, with products such as barbecue grills, hard surfaces, electrical lawn and garden equipment, as well as fixed cooperative plans for items such as hand tools.
“The MDFs only reach those who ask for it.”
Jeremy Stout, director of marketing for LaValley’s Middleton Building Supplies in Rutland, Vermont, sees cooperative financing as an integral part of both maintaining and increasing his marketing budget annually. The cooperative’s funds comprised approximately 30% of LaValley’s annual marketing budget at 10 retail hardware stores, several modular home businesses, and its pinewood factory. The most important conclusion of cooperatives for Stout is that MDFs (manufacturer development funds, or those funds above formal cooperative funds) only go to those who request it. You are constantly negotiating with the manufacturer’s sales representatives for additional funds.
The key to successfully accessing these funds? Be prepared, have a marketing plan with a specific need, and use it for additional funding. Stout finds that many times the lines blur on what cooperative financing is. Since many manufacturers use automatic refunds as a cooperative reimbursement method, those funds do not often go back to marketing results. With all of its successes, LaValley’s still estimates that 30-40% of the available funds go unused. Often times, the accruals are simply not enough to offset the investment in a marketing campaign or they are simply unaware of the funds available. Stout focuses on brands with formal high-margin, shift, or sales cooperative programs, in product categories such as windows, doors, ceilings, decks, and cabinets.
Big Country’s True Value owner Adam Broughton saw double-digit sales growth in 2017, with cooperative financing accounting for 35% of his overall annual marketing budget. The funds are used primarily for radio, television, inserts, and direct mail. With the addition of Broughton’s son to the business, they are now exploring digital marketing opportunities through social media marketing. True Value’s funds included the majority of its cooperative dollars found with the help of True Value using the printed insert program 12 times a year. Direct marketing to True Value Rewards customers is incredibly effective for Broughton. With the rural location, Big Country has found its marketing niche by doing its own voice-over work on radio and television, and targeting campaigns that feature brand-compliant advertising with a “Why not the big box” message. Broughton has an extensive line of outdoor electrical equipment, with the Cub Cadet line of mowers and tractors, supported by brand marketing. Big Country has become the leading distributor in the region, and Broughton attributes much of this success to its cooperative marketing campaigns distributed via direct mail, inserts, radio and television purchases.
The cooperative’s cycle of success
Bottom line: Cooperative funds are an integral part of expanding marketing budgets, leading to increased sales. With funding from the manufacturing cooperative, hardware retailers have achieved several goals. First, by having advertising materials that meet brand standards, the retailer’s local message combines the look, fit, and feel of the brand’s national advertising message. Second, by advertising more with the support of cooperative financing, the retailer has become part of the “cooperative success cycle.” If you advertise more, you will increase your store traffic. Increased store traffic leads to increased sales. Increased sales leads to increased purchases from the manufacturer, which then translates into more cooperative funds for more advertising.
Now is the time to contact your hardware retailers and discuss a strategic marketing plan that uses cooperative funds, based on previous year’s sales for their 2018 marketing. Spring is here and hardware retailers will use those funds. to offset the marketing investment with advertisements including electrical outdoor equipment, exterior painting, decking, garden tools and accessories, landscaping supplies and more. Visit new prospects and close using the cooperative value proposition. Schedule appointments with existing clients and double last year’s sales by making sure your client is aware of all the co-opportunities available to them.
We often meet with retailers and hear the refrain: “We use all of our cooperative funds.” In my experience that is true, you use all the cooperative funds that you know of. Often times, there are financing opportunities that have not been explored because the retailer simply did not know the financing opportunity existed. By working with a medium that has a full-time Cooperative Department, they will be able to explore all the opportunities available and will be able to share that information with the retailer. Additional accumulations can be found with calls made directly to the manufacturer’s cooperative administrators. Content can be accessed, pre-approvals can be obtained from the manufacturer, and administrators can help ensure the retailer has the proper documentation to claim refunds, such as proof of performance, proof of payment, and any other required claim forms. With up to 67% of manufacturers now accepting electronic claims, filing a cooperative claim can be as simple as attaching the PDF document and sending a single email.
The cooperative opportunity is huge. Sixteen dollars!