How Do Co-Op Funds Work?
Co-op funds can be a complicated concept but, when understood properly, they can prove lucrative for retailers. In simple terms, these funds are a portion of a company’s sales budget that rewards retailers for selling their products. It’s like an incentive program, where retailers receive perks for their loyalty. Here’s everything you need to know about co-op funds.
Co-Op Funds Explained
“Co-op funds, also known as cooperative funding, is a portion of a company’s sales and marketing budget that rewards their channel partners as they sell more products,” says Energy2Engage. “Previously, co-op funds were given as account credits. Unfortunately, the account credits don’t create the mental link from the buyer between their purchase and your brand.”
The amount given will vary depending on the amount the retailer purchases, and some companies cap the amount but, generally, they vary from 1-3 percent of the total number of purchases. Typically, the higher the number of purchases, the more co-op funds retailers will receive, though this isn’t always the case.
The problem is, many companies don’t tell retailers about co-op funds, and many retailers are unsure about how they work. In some cases, companies use these funds for other promotional costs or save them for larger retailers.
Typically, companies distribute co-op funds as part of a loyalty program. The company allocates the funds, and the retailer receives an email telling them that their rewards are active. Often, these rewards can be spent on promotional items featuring the company’s logo, such as point-of-sale displays and branded merchandise. These goods can increase the sales of products in-store.
How to Negotiate Co-Op Funds
Retailers can negotiate the co-op funds they receive from companies or, at the very least, ask that the funds are allocated for a particular promotional purpose. For example, co-op funds can be used to advertise the fact that your store carries a particular product manufactured by the company.
If a company sells footwear, for example, they could take out an ad online telling the community that they can purchase their shoes in your store. These advertising costs will come out of the co-op funds, and you will be able to increase awareness about your store and boost footfall in your store.
Problems With Co-Op Funds
Some retailers might receive cheaper inventory in lieu of co-op funds. This might benefit you in the long run, especially if the cheap inventory sells. However, you might want to negotiate with the company who provides you with these products and ask them to allocate co-op funds, instead. This could provide you with a return on investment that far exceeds the profit from selling cheap stock.
Whatever you decide, it’s important that you maintain a good working relationship with all the companies who provide you with products for your store. Co-op funds can be extremely useful, but you need to understand how they benefit your bottom line.