Talk about putting your money where your mouth is. Like many dealers nationwide, Kuiken Bros. Lumber of Fair Lawn, N.J., uses co-op dollars to support promotional mailings. But for years, Kuiken Bros. also has held what Ryan Mulkeen, director of marketing at the seven-yard dealer, calls "beefsteak dinners" for its builder-customers, at which a sponsoring supplier makes a presentation. It recently held four of these dinners, attended by nearly 900 builders, which door manufacturer Masonite supported through Bridgewater Wholesalers, its local wholesaler.
"I wish all of our dealers were marketing as aggressively as Kuiken," says Jerry Cooper, director of marketing for Bridgewater, which brought Masonite's 24-foot mobile showrooms to the events.
Pro dealers, especially those with minimal or no sales to consumers, are steadily moving away from the conventional advertising that co-op money typically funds–such as newspaper ads, circulars, radio and TV spots, and billboards–and toward marketing that connects their yards and services more directly and personally with builders and contractors.
Hayward Lumber brought 60 of its builder-customers to last month's Pacific Coast Builders Conference in San Francisco, where the Monterey, Calif.?based pro dealer treated the builders to dinner, a performance of the musical Jersey Boys, and tickets to the convention. How could it afford to spend tens of thousands of dollars for such wining and dining?
In large part because Hayward used co-op dollars provided by TruStile Door and other suppliers. And representatives of those companies, in turn, got to meet the builders.
"Money is money, and there's a fine line between co-op and 'market development,'" says Suzanne Scattini, Hayward's director of marketing. "But we don't just logo shirts to get co-op money; that's not worthwhile." Instead, Hayward prefers marketing that either is a call to action or has an educational edge that helps its customers improve their businesses, says Scattini. For example, in the last week of April, Hayward used co-op dollars to support a seminar titled "Seven Pitfalls of Contractor Law." More than 100 builders attended.
Pro-Build Holdings also has started converting co-op funds into marketing programs that target builders more intimately. "Seventy-plus percent of what we'll be doing, going forward, will be in a face-to-face?type environment, and we're finding that a lot of vendors are very receptive to [supporting] that," says Carolyn Atkinson, director of marketing and communications for the Englewood, Colo.?based company.
But as pro dealers wean themselves from consumer-focused advertising, the burden of proof for claiming co-op dollars is changing. Where dealers might supply a tear sheet of an ad or a CD of a commercial to prove where they spent co-op dollars, verifying an event, like a golf outing or a dinner, is trickier, as is gauging the marketing's effectiveness.
These challenges are compounded by the fact that some vendors have reduced or eliminated their co-op allocations, or are tightening their compliance rules. "Vendors simply aren't used to us coming to them and asking for co-op money to support 20 golf outings," says the director of marketing for a major pro dealer chain in the Southeast, who requested anonymity. "But the industry is in transition and the verification process has got to change, because those are the conversations we're going to have more frequently with vendors."
Fewer Dollars, Tougher Claims
The basic mechanics behind co-op advertising haven't changed much in decades: suppliers allocate a portion–between 1% and 3%, typically–of a dealer's previous year's purchases to use for product promotions via mailings, media, and in-store merchandising. Some vendors require a portion of their allocation to be put toward specific advertising, but most allow dealers some latitude.
The pool of available co-op dollars, never that deep to begin with, is getting shallower, according to several sources. "There's a lot less co-op money out there than people are led to believe," says Magd Riad, director of marketing for Atlanta-based distributor BlueLinx Holdings, who adds that only one of the seven co-op programs his company is involved with has significant dollars available. Earlier this year, siding supplier James Hardie alerted customers by letter that it was eliminating its "flex funds" program, and that dealers had until July to spend the co-op dollars they had already earned. A spokesperson for Hardie declined to comment, but its letter stated, in essence, that Hardie felt co-op had become extraneous to establishing more direct contact with its dealer base.
Kim Downs, director of marketing for Wolf Distributing Co., York, Pa., thinks manufacturers might be scaling back co-op programs in response to demands from builders for lower prices. Then again, suppliers also might see less value in the way dealers want to spend their money. "If I were a manufacturer and I saw that dealers were doing less electronic media, I might want to eliminate co-op, too," she says.
It does seem suppliers and dealers are still betwixt and between when it comes to how best to use co-op. For example, Andersen Windows–which this year lowered its allocation to dealers by a quarter percentage point, to 1.25% of last year's purchases–wants a portion of its contribution to be used for mass media. But Andersen now also requires that any co-op spent on giveaway "wearables," like T-shirts and caps, must be tied to an event, like a trade show or builder meeting, says John Warren, an outside salesman for Allendale, N.J.?based Black Millwork, Andersen's distributor in New York and New Jersey.
"Scaling back on co-op funds is not sound business sense, and events are more effective at reaching the customer than simply trying to draw a customer into ... showrooms," says Dick Dodge, vice president-builder distributor sales for the Timberlake Cabinetry division of American Woodmark. Dodge also notes that events and like promotions in casual settings "deliver better feedback and results, as builders are more willing to be open and honest in their discussions."