How Co-Op Advertising Works
Simply stated, co-op advertising is an advertising partnership between two or more companies that share in the chain between manufacturing and retail. The companies involved are commonly manufacturers, wholesalers, and retailers looking to improve sales of a specific product.
In many cases, large brands already have co-op advertising plans established. Smaller partners only need to apply to the program to gain access to valuable advertising dollars. A study by the NRP and Trade Management Associates estimates in 2011, co-op advertising expenditure was approximately $520 billion worldwide, though less than 1% of that was directed toward digital channels.
When a wholesaler or retailer is looking to take advantage of co-op advertising, there are four types of plans generally available according to The Hometown Shopper:
- 100% Plan – Manufacturer pays 100% of the advertising cost
- Shared Plan – The manufacturer and partner share a pre-determined percent of the cost
- Unlimited Plan – The manufacturer pays a fixed percent of all advertisements
- Fixed Plan – The manufacturer offers a fixed budget for all advertisements in a year
Advertisers generally make funds available based on the size and sales of the partner. If the retailer sells $10,000 per year of the manufacturer’s product they will get a smaller co-op funds allotment than a retailer selling $50,000 per year.
Co-op advertising arrangements generally require the partner meet certain requirements set by the manufacturer. Those often include the inclusion of the manufacturer logo, a photo or illustration of the product in the advertisement, and restrictions on including competing products.
Co-op advertising, when implemented appropriately, benefits everyone involved. A partnership between brands can benefit both businesses through brand association, shared advertising costs, enhanced advertising reach, and sales growth by leveraging the resources of a bigger company for smaller retailers and manufacturers to reach new audiences.
For example, think of a small retail hardware store. On their own, they may only be able to afford a limited newspaper advertising plan. The same store, leveraging a co-op advertising partnership with larger hardware suppliers, have the opportunity to purchase advertising that they were unable to before.
In that scenario, the small store benefits from the new audience and reach of an expanded marketing campaign. The supplier benefits from putting the brand name on the local retailer’s advertisements, acquiring additional sales at that store and from other retailers as well.
The advantages of co-op advertising are vast for both the manufacturer and the partner. The most measurable advantage of co-op advertising is the savings of advertising dollars for both companies.
- Save advertising dollars
- Lesser known brands increasing brand awareness and trust by associating with well known brands
- Sharing brand loyalty with strong brands that have many established fans and followers
- Assistance creating advertising with more experienced branding experts
Small brands can be big winners when they correctly leverage their relationships with big brands, and big brands can get increased recognition and reach by working with smaller brands around the world.
Cooperative advertising has clear advantages, but there are some barriers to getting started. The majority of challenges faced when starting co-op advertising are administrative. Most issues can be easily overcome by reading through the rules set forth by the manufacturing company and working with their advertising department.