Co-op advertising stands for cooperative advertising, which is a collaborative approach where the product manufacturer pays part or all of the advertising costs and often supplies the retailer with brand assets to use in the advertisement.
The logic is simple: When manufacturers, distributors, and retailers share the advertising costs on print and digital promotion, co-op advertising reduces the cost of advertising for channel partners, which increases the likelihood that those partners will produce quality marketing materials that can reach the target audience. Co-op advertising is a strategy for scaling a company’s marketing program across multiple locations across the distribution network. Pooling resources is cost-effective, but it’s also smart marketing: When manufacturers provide certain assets, including images and videos, they can help ensure that local marketing is highly targeted and brand-compliant.
Also known as co-op marketing, co-op advertising can include everything from a few print ads to a complete marketing campaign. Co-op dollars can cover the cost of paid search, PPC banner placements, TV ads, and influencer campaigns on social media. Co-op advertising is about collaboration. Pooling resources has become even more important since the COVID-19 pandemic. And when manufacturers repay the retailers for all or part of the cost of the advertisement, they make sure their brands get mentioned.
Co-op advertising works like this: Vendors supply partners with co-op funds to market and sell their product, and the amount is a percentage of the total amount of products the partner purchases that year.
Brands rely on channel partners to drive sales and awareness at the local level, but channel partners often lack the time, knowledge, and resources to develop and execute an effective advertising strategy on their own. In fact, according to our State of Local Marketing Report, 53% of partners don’t know much about advertising.
Co-op advertising programs solve this by providing a set of rules for channel partners to access corporate funds and marketing materials. The rules are in place to ensure local marketers use the brand assets properly and don’t misrepresent the brand with marketing materials that corporate or legal have not approved. Some co-op advertising programs may have rules around which vendors partners can use; incentives to guide partners toward the most effective tactics; and processes for submitting claims and receiving reimbursement. Although it varies by program, co-op funds can be used for anything from point-of-sale displays to digital ads, promotional tchotchkes, and even rent.
In many scenarios, a brand develops the messaging for a corporate campaign, then distributes the campaign marketing materials to channel partners through a co-op platform. Depending on the program’s sophistication, the brand assets may be customizable so that the messaging is more relevant at the local level. Channel partners can select which tactics to execute, follow the designated set of rules, and use their co-op dollars to cover the costs. The brand may cover the cost entirely or partially, as reimbursement levels vary by tactic. For example, social media ads generate a higher ROI than branded golf balls, so a brand may be willing to contribute more funds toward a local social media campaign.
Because channel partners don’t have to come up with the strategy, create the marketing materials, or fund the execution entirely themselves, the idea is that they’ll be more likely to participate in marketing efforts. In addition, co-op advertising reduces the effort and resources required to scale an advertising campaign. Since the same materials are accessible to locations across the country or even the world, independent channel partners no longer have to invest in creating their own marketing materials or worry about accurately representing the brand.
Co-op fund accruals work over the course of the business year. The amount of co-op funds that vendors supply their partners is a percentage of the total purchases that partners have made from the vendor. And a partner will usually accrue co-op funds while they purchase products. On average, the accrual amount ranges from 1% to 3% of the partners’ purchases, and the more products partners buy, the more co-op funds they accrue.
Vendors have different rules about utilizing co-op advertising funds, and as a cooperate approach, partners will pay part of the cost of the advertising. If your co-op advertising program pays 60% of the cost of a $1,000 campaign, and you have $1,500 accrued co-op funds, your vendor would still pay $600 of the cost, and you would have $1,1000 accrued.
Any channel marketer knows that keeping brand consistency is an ongoing challenge. Brand guidelines are integral to maintaining brand consistency across your channels. To manage your guidelines effectively, first:
Prior approval, often called pre-approval, is the process of submitting marketing materials for approval before using them in marketing. Partners who want their marketing materials pre-approved will submit a plan through their co-op marketing platform. At this stage, the brand makes requested revisions to the submitted material or approves. Once the partner makes revisions, they can then resubmit for prior approval. Knowing the brand guidelines will help at this stage.
To get reimbursed for the costs of marketing, partners must first read the brand rules and guidelines. Not all marketing efforts will be eligible for reimbursement. Some only qualify for partial reimbursement. Before spending money on co-op advertising efforts, partners should determine which costs the company will cover.
Timeliness is important. Follow guidelines, because late claims, or claims submitted without prior approval, will likely not get reimbursed.