What is Co-Op Advertising?
Every business would love to receive free or deeply discounted advertising. The good news is that there are ways to get it through co-op advertising programs. The bad news is that it's not available for every type of advertising or business. Plus, difficult economic times have seen these programs dramatically reduced or even eliminated. So the watchword is, if it's available, take advantage of it!
Co-Op Advertising Definition
Co-op advertising is ads, promotional products, direct mail and other advertising efforts whose cost is covered by multiple advertisers for their mutual benefit. Some programs refer to this as co-op marketing. The two terms are often used interchangeably; however, co-op marketing may encompass additional public relations, incentive or non-advertising efforts which benefit all parties.
The percentage or dollars paid by each participant in the co-op program can depend on several factors and the program's objectives.
Examples of Co-Op Advertising Programs
Here are some common examples of co-op advertising programs and how they are used:
- Co-Op Advertising or Marketing Fund. A common marketing fund arrangement is one between a manufacturer and service providers and their wholesalers, dealers, representatives, distributors or retail outlets that actually sell the products or services to buyers. Sellers can be reimbursed by the manufacturer for a portion (or all) of the advertising they do to promote the product or service. The reimbursement or funding the seller receives often depends on the volume of sales achieved. This serves as both assistance to make sales, as well as a reward for increasing sales volume. In addition to advertising reimbursement, a manufacturer or provider may also offer additional incentives and prizes for sellers' sales performance. There are usually significant rules and qualifications for these programs, especially when it comes to size, scaling and color of logos. Make sure they are followed and obtain approvals throughout the process to avoid the scenario of having to pay 100 percent of the costs for non-compliance.
- Discounted Self Promotions and Offers. In addition to or in lieu of co-op advertising funds, some manufacturers or service providers will offer discounted products and services for purchase by sellers to help them promote the offerings. The seller can use these for demonstrations, customer samples or to become familiar with the product or service. Example #1: More so in the past than today, travel agents would be given the opportunity for free or deeply discounted fam tours (short for familiarization tours) so that they could more effectively sell travel packages and destinations. As with co-op funds, there may be significant rules and qualifications for participation. Always check before purchasing. Example #2: A mug manufacturer gives a promotional products distributor a deep discount on mugs, imprinted with the distributor's logo, to help the distributor sell more of the mugs.
- Franchise Advertising. Franchisors can give their franchisee owners the opportunity to participate in their local or national advertising efforts. The franchisee's location information is usually integrated into the franchisor's advertising artwork. Like other co-op programs, this helps defray the cost of advertising for both the franchisor and franchisees. Usually the franchisor has strong brand name recognition in the market, making the opportunity attractive to franchisees. This also helps the franchisor keep some control over the branding to maintain a consistent brand presence within a market or many markets.
- Joint Advertising Ventures. In joint venture advertising, non-competing, but complementary, businesses with similar market demographics purchase advertising to promote all participating businesses. Example: A wedding planner, a DJ and a florist may create a direct mail piece promoting all three of their businesses to brides. CAUTION! Many publications and trade shows strictly prohibit sharing of purchases such as ads and trade show booths. Always ask prior to making a purchase commitment for a joint advertising venture. As well, make sure that each advertiser's commitment and responsibilities are detailed in signed written agreements. Seeking legal advice when creating and executing these agreements is recommended to help prevent disputes.
- Sponsorship Opportunities. Though not always considered a co-op advertising program, a variation on the joint advertising venture is sponsorship. This is quite common with sports and fundraising efforts. In these ads and promotions, both organizations are prominently and often simultaneously featured. As with other joint advertising, legal counsel is recommended for these agreements. Example: Sports sponsors for events, such as the Olympics, are often referred to as "Proud Partner of____." Having the sport's blessing is an honor for the advertiser and both the sport and the sponsor benefit from the joint promotion.
How NOT to Use Co-Op Advertising
As an advertising sales rep for a trade newspaper, most of my clients used co-op advertising dollars from their vendors to help defray the cost of the ads they bought from me. But here are two things that would sometimes happen that would derail their marketing:
- Joining the Non-Believers. When their vendors would reduce their available co-op advertising funds, the advertisers would reduce their ads and lose any marketing momentum they had built up to that point. So they really didn't believe in using the advertising; they just didn't want to lose their co-op advertising privileges. Buying ads from me was just a way to legitimately preserve those funds.
- Choose and Lose. When co-op marketing funds were reduced or restricted, the advertisers would have to make a decision about where to spend those fewer dollars. Often, I would lose them either somewhat or entirely in favor of spends on promotional giveaways or incentive trips for existing customers. While those purchases can have a positive impact on the overall marketing effort, they didn't usually help bring in new customers into the sales funnel.
Did you know what co-op advertising was before reading this article?
This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.
© 2014 Heidi Thorne