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Stop leaving your bike out in the rain: One Guy’s Perspective on Co-Op

 

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A very wise entrepreneur once told me that, “..if you didn’t use your own money to pay for your bike, you are likely to leave it out in the rain…” Today, this has me thinking about advertising co-op funds. As an industry, do too many of us sign up for ineffective and/or overpriced products because some portion the cost is offset by our OEM co-op allowance? Follow my thinking for a minute:

1. You likely use most or all of your co-op. In 37 years in Automotive, I don’t ever remember a dealer that left a pile of co-op money on the table at the end of the year (except for BMW). Sure, there was some panic in Q4, as they looked for ways to spend their money, but that is the exception. It is fair to say that most spent it all and would spend more if it were available.

2. Your OEM may not apply the same rigor to product evaluation as you would. Over the last 20 years or so, I have observed the process for deciding which products qualify for co-op allowance. If I may say, I am underwhelmed by the rigor. How many dealers would be willing to let the OEMs vet their marketing, product offering, and spending strategy? How many among you consider those OEM employees who review this stuff to be experts in the category of marketing they rule over? How many OEMs allow one vendor to review and approve the work of another vendor? I mean no disrespect to these fine folks; I was one of them for a long time. But, we all know you rotate through assignments and seldom spend enough time to develop real expertise.

3. Your OEM may not be taking risks on new technology or programs. As consolidation has taken place in automotive marketing over the last 10 years, has anyone noticed how difficult it is for new, independent or emerging technologies to break into co-op programs? Am I the only one who sees the same names and faces at all the conferences and in all the different programs? If you are rotating through a marketing assignment over the next two years hoping to be a regional manager, how willing are you to take a risk on a new product and go out on a limb to get it included in your co-op program? How willing are you to get a call from someone in senior management, who got a call from someone they know, asking why you added “that product” to their co-op program? I’ve been there. I’ve been on the receiving end of that call.

Time to Stop the Cycle (or Bike)

If we will spend 100% of the money available to us in co-op on something this year, why are we willing to tolerate ineffective or overpriced products? I’d understand it if there was money left around at the end of the year. As an industry, we should evaluate the effectiveness of marketing products and services independent of whether they are included in a co-op program. We should challenge our team to evaluate the performance of the products as if 100% of the cost was dealership money, and no part of it was incremental. Does it work? Is it cost-effective, regardless of co-op? Does the measurable, incremental gross margin return more than the cost?

What if programs qualified for co-op based on their performance among the OEM’s best dealers? What if they had to demonstrate real, measurable value? What if the OEM’s best-performing dealers had no restrictions on what program they could use? It seems to me that many dealers have demonstrated their proficiency and expertise through their performance and the way they represent the brand. Why drag them down to the average by forcing them into “lowest common denominator” programs? What if performance ruled the day? Would that not reward innovation that works…as demonstrated through sales, service and market share?

We owe it to our industry to continue to innovate. We owe it to each other and our stores to encourage new technologies and new approaches to help differentiate us and make us more effective. We owe it to the OEM to demand better programs and some freedom to deliver results. We owe it to our store associates to use the best programs we can find to drive store results, regardless of whether they are subsidized by an OEM. Let’s face it: Most of you are going to spend your co-op money on something, anyway. Why not make sure what you spend it on is worth it and really works?

To summarize, I once heard a trainer tell someone he was trying to sell on leasing that “A car’s value in the market today is not based on how you paid for it.” Neither is the value of a marketing product or service. It’s time for each of us to take a good, hard look at whether co-op is supporting our goals and our success, and be ready to make decisions based on performance instead of whether the OEM’s co-op program supports it. It’s time for a new way of thinking – one that includes taking care of that bike!

Gary Marcotte, Board Member
During his 13 year tenure at AutoNation, Inc., Marcotte held executive positions in marketing & operations and spearheaded a number of strategic initiatives that helped the company become America’s largest, automotive retailer. He served as their SVP of Marketing for six years, and was responsible for all marketing, advertising, owner retention, and digital marketing. Earlier in his career, Marcotte helped launch Toyota’s Lexus division, where he developed and implemented the division’s key selling processes. In 1991, he established the industry-changing Lexus Certified Pre-Owned Car program for Toyota.