Features — 01 July 2012


Untapped Opportunities
Co-op advertising can help generate traffic and boost bottom lines

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By William F. Kendy

Shooting range owners and firearm retailers need every break they can get.  Margins are margins, and a couple of extra points here and there can make a difference on your bottom line.  One way to get more return on investment is co-op advertising.

Co-op advertising is a program in which the manufacturer/distributor pays a portion of a range and/or retailer’s local advertising cost, be it in television, cable, radio, a billboard, a newspaper or magazine ad or a flyer. In exchange the range/retailer must feature the manufacturer’s name and products in the advertisement and adhere to certain requirements.

Co-op advertising isn’t new.  It is a child born of the past misuse of “promotional allowances” for larger customers, and it is a tool that allows re-sellers of products to compete on an equal and proportionate level with their competitors.

Co-op allows you to advertise and promote your facility and have a partner pay for part of the cost.

Because the manufacturer is footing part of the advertising bill, it wants its brands and products to receive top billing and it wants the range/retailer to adhere to its prescribed rules to get paid.  The manufacturer’s goal is to get customers to buy its products.

Similarly, the main goal of a range/retailer is to get customers to buy merchandise. Secondarily, it is important to establish credibility as being an outlet associated with a well-known national brand.

Co-op advertising is a win-win situation. It can save ranges money, extend the scope of their advertising and help create an effective and professional image for the business.  The manufacturers can increase their brand awareness and increase their local market share.

Co-op advertising is estimated to be a $50 billion dollar pot of which almost 25 percent falls off the table and is never used or claimed by retailers. Manufacturers build the co-op allowances into the price of their products, and every unspent co-op dollar goes right back to their bottom line.

With everything to gain and nothing to lose, why don’t all ranges and retailers jump on the co-op bandwagon?

“When I oversaw advertising and promotions at Smith & Wesson and Colt I was shocked at the low redemption rate on co-advertising funds,” said NSSF Senior Vice President and Chief Marketing Officer Chris Dolnack.  “I think that retailers perceive co-op being very time consuming and complicated when in reality if they just sat down with their rep they could easily figure out the program and recognize that not only is it not that difficult but it also can be very profitable.”

Robin Ball, CEO of Sharpshooter Range in Spokane, Wash., utilizes the co-op advertising opportunity.

“Co-op is free money. Yes, it can be a little bit cumbersome to work with, but it is worth the effort,” Ball said.  “If a customer walked into your store and put $10,000 in a trash can, wouldn’t you take the time and effort to take it out?”

How co-op advertising works

In order to take advantage of co-op advertising ranges and/or retailers need to know it works.  Here are the steps:

  1. A range/retailer buys product, either from a wholesaler, distributor or directly from a manufacturer.
  2. The net purchased products accrue co-op dollars.
  3. Once sufficient co-op dollars accrue (or based on projected purchases) a range/retailer places approved advertising locally.
  4. Increased range/store traffic results in additional sales.
  5. The range/retailer pays the advertising invoice and submits a co-op claim and documentation to the manufacturer for its share of the cost.
  6. The manufacturer sends a range/retailer a check for its portion of the cost.  Some programs allow range/retailers to take their co-op money in promotional items such as hats, shirts, mugs, signage, etc.

The more products you sell, the more co-op funds you accrue.  The more funds you have, the more you can advertise.  The more you advertise, the more you sell.  It’s a big circle.

Terminology

Co-op programs are all the same only different.  Each has its own nuances.  Still, there are some terms and components that are common to all programs.

Accrual:  Accrual is the percentage of net sales that the manufacturer will pay. Programs differ.  For example, Browning, Ruger and Remington offer participating dealers a 2 percent of net purchases accrual.  ATK has a Premium and a Gold dealer level.  The Premium level has a $100,000 qualifier and accrual rates of 3 percent on ammunition and 5 percent on accessories.  The Gold Level has a $50,000 qualifier and a 2 percent accrual rate on all ATK products.

It is important to remember that to be legal co-op programs have to be offered to all participating dealers on an equal and proportionate basis, but the terms can differ based on the level of a dealer.  A million-dollar dealer is eligible for the same co-op program as another million-dollar dealer.  The same holds true for all in the five-million-dollar range, but the deal may be different than what is offered to the million-dollar facility.

Accrual Period: Most co-op programs run on a calendar year basis, but there are exceptions.  ATK, Remington and Ruger are on a calendar year, but the accrual period for Browning and Winchester is Nov. 1 through Oct. 31.

Reimbursement: This is how much of any advertisement a manufacturer will pay.  That can be dependent on products and/or media.  Winchester pays 100 percent of the cost of an ad featuring its rifles or shotguns.  Browning will pay between 50 and 100 percent of the advertisement cost depending on the media in which you advertise.  Remington pays 50 percent of ads featuring firearms and 100 percent to support ammunition and accessories.  ATK pays at the 100 percent level, and Ruger picks up 50 percent of the cost.

Eligible Media: If you want to get reimbursed, you need to run your advertising in approved media.  They include radio, television, cable, newspapers, billboards and, in some programs, Internet.  ATK now allows dealers to utilize a portion of their accrual on Internet advertising, and Browning also allows dealers to advertise on the Internet.  In the case of Browning, the reimbursement is based on a $.50 per unique click.

Special Requirements: ATK won’t pay for advertising with a competing brand in it.  Browning requires that their name be mentioned a minimum of three times in a radio or TV commercial.  Many manufacturers will have radio scripts/spots, television commercials and print ads for you to use.

Backend:  In order to get paid, dealers need to fill out the appropriate forms and send them, along with paid invoices, copies of ads (or affidavits if they are broadcast commercials) and other required documentation, to the manufacturer or its co-op servicing vendor by a certain date.  All the details are outlined in the individual co-op programs.

Getting Started

Identify your top-selling 10 to 20 brands and find out which offer a co-op program.  Get their rules and guidelines and go over them with your representative.

Get with the companies that monitor co-op to find out how much you have accrued (and what you accrued last year, which will help you in your planning).  For those companies that don’t keep track, get with your distributors and vendors for copies of invoices by manufacturer and products to serve as guidance.

Determine how you want to spend the co-op (supplementing your exiting advertising, extending reach, increasing frequency, targeting new markets, etc.) and develop creative that complies with the program rules.  Make sure you have adequate inventory on hand.

Set up a record-keeping procedure (and designated person) to keep track of what was advertised, where and when it ran and when you paid the bill.  Stay current and within deadlines for filing claims.

So, is co-op advertising worth the trouble?

“We use up just about all the co-op we receive from our main manufacturers, and I try to incorporate less reimbursable products in our newspaper fliers,” said Glenn Duncan, owner of Duncan’s Outdoor Shop, an indoor range and retail facility in Bay City, Mich. “We find that co-op funds stretch our advertising program almost 10 percent, and it is worth all of the effort.”

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