The 100% Plan
The manufacturer pays the total cost of the retailer’s ad. The money comes from the retailer’s co-op accrual funds, which are generally based on a percentage of net purchases.
For example: Apple computer Inc. offers a 100% plan based on a 5% allowance of the net purchases of computer products. Merlyn Computer Store has purchased $40,000 of Apple products, which would earn an accrual of $2,000 (5% of $40,000). If Merlyn runs one $2,000 ad, Apple will reimburse for it, but the accrual fund will be totally depleted. On the other hand, if Merlyn runs a $1,000 ad, it will still be paid 100% by apple, but there will be another $1,000 to spend on a second ad.
The Shared Plan
The manufacturer and the retailer each pay a portion of the ad cost. The ratio is decided upon by the manufacturer and could be 50/50, 75/25 or any other predetermined arrangement.
For example: John Deere Power Equipment offers to pay 50% of a retailer’s ad cost, based on an allowance of 3% of net purchases. Since Greenwood Lawn & Garden has bought $10,000 of mowers, its accrual amount of $300. If Greenwood runs a $600 ad, John Deere will pay $300 (50% of the ad cost). If Greenwood runs a $1,000 ad, John Deere will still pay only $300 because the manufacturer’s share can never exceed the amount of the retailer’s accrual.
The Unlimited Plan or Open-End Plan
This plan is often offered on seasonal items or for specific promotions, though some manufacturers offer it as their standard plan. Accrual is not tied to purchases in this plan; instead the manufacturer contributes a stated percentage of the cost of each ad. In some cases, this percentage is paid regardless of cost or frequency, whereas in other cases, the total accrual may be limited to a given number of ads or a maximum dollar amount.
The Fixed Plan or Bonus Plan
This type of plan is usually offered for a specific product and time period. Bonus plans are usually in addition to a manufacturer’s regular co-op plan.
The Negotiable Plan (informal or arranged)
There may be no specific manufacturer co-op program, however, funds are provided on an individual needs basis. Funds are provided only if the dealer asks for them. Also knows as “The squeaky wheel gets the grease.”
For example: Dealer purchases $60,000 of products and proposes a $1,200 ad budget. Manufacturer agrees to a shared cost of $600. Dealer pays $600 out of pocket for the ad cost.