Co-marketing credits: splitting the promotion with your wholesale vendors

You bought a vendor's flower at wholesale. A month later you run a 20%-off weekend to move it, and the vendor was all for it — it's their brand getting the push. The units fly off the shelf at the discounted price. Then the month closes and you realize the entire markdown came out of your margin, even though the promotion was a shared idea. Co-marketing credit is how you square that up: the vendor covers a pre-agreed share of the gap between what the product should have earned and what it actually earned.

One thing to be clear about up front: co-marketing credits are wholesale-only. On a consignment order, the vendor's cut is calculated on whatever the product actually sold for — so when you discount it, the vendor already shares that discount automatically through the split. There's nothing left to bill back. Consignment product is eligible for return and waste credits only. Everything in this post is about product you bought outright, where the full markdown otherwise lands on you.

What counts as co-marketing — and what never does

The line here is not fuzzy, and keeping it sharp is what keeps vendors trusting the number:

• Eligible: pre-approved promotions. A promotion the vendor agreed to fund — the products, the discount rate, the dates — recorded before it runs. That advance agreement is what makes the resulting discount billable. The mechanics of getting that yes on the record are covered in why advance vendor approval protects your margins.
• Never eligible: retailer-run markdowns. Loyalty discounts, employee discounts, and one-off POS adjustments are your programs, not the vendor's. They are never charged to a vendor. A discount with no vendor agreement behind it has nothing to reconcile against, so it stays on your side.

This separation is deliberate. No vendor wants to feel like every internal markdown gets billed back to them. Drawing the line clearly — this is what we agreed to share, this is what we're absorbing ourselves — removes the argument before it starts.

The math

Co-marketing is priced off keystone — the price the product needs to hit to earn your target margin. Keystone is your unit cost divided by one minus your target margin:

keystone = cost ÷ (1 − target margin)

At a 50% target margin, keystone is simply 2× your cost. When a promotion sells the product below keystone, the gap is the shortfall, and the vendor covers a share of it at your agreed co-marketing rate (50% by default — the classic "split the billboard" arrangement):

credit = (keystone − sale price) × co-marketing rate

You gave up $8 of margin per unit to run the promotion; the vendor covers half of that gap, so your real cost of the promo is $4 a unit instead of $8. The other half is the marketing spend you were always going to make to move product and pull traffic. Every below-keystone promotional sale on that vendor's product is matched against the pre-approval and rolled into one line on the monthly credit memo.

The guardrails

• Pre-approval is the gate. A promotion the vendor never agreed to fund lands under "promotions without prior approval" and doesn't get charged as a clean co-marketing credit — the vendor has to be asked, and they can decline.
• Retailer programs are excluded by name. Loyalty, employee, and POS-adjustment discounts are filtered out of the vendor ask every time.
• The name has to match. The promotion in ShelfSpace should carry the same name as the discount in your POS, so sales match cleanly to the agreement.
• Silence resolves a pre-approved credit — never an un-pre-approved one. If the vendor goes quiet on the memo, a pre-approved co-marketing credit moves forward after the review window (applied automatically for vendors you've set to auto-approve, or staged for your one-click approval otherwise). An un-pre-approved promotion always needs the vendor's explicit yes, and never deems approved on silence. What happens on silence is covered in what happens when a vendor doesn't respond to a credit memo.

Worth stating plainly: the retailer sets the terms — the target margin, the co-marketing rate — and they take effect immediately. ShelfSpace doesn't broker the deal between you and your vendor; you two agree to whatever you agree to, and the platform runs the operations: matching the sales, building the memo, sending it, and applying the approved credit to the next check.

What to do Monday morning

• For any promotion you're planning on wholesale product, get the vendor's sign-off before it runs, and record it. That single habit is what turns the markdown into a shared cost instead of a solo one.
• Name the promotion in ShelfSpace exactly what your POS calls the discount, so the sales match automatically at month-end.
• Check your co-marketing rate per vendor against what you actually negotiated. The 50% default is the common split, but a vendor who agreed to more should be set higher.

Co-marketing is one of three wholesale credit types, alongside inventory-aging credits and the returns and waste credits that apply on every order. Together they're what a real credit memo recovers each month — walked through line by line in the anatomy of a vendor credit memo. To see what your last 90 days of promotions should have been co-marketing, start with a free evaluation.