Co-op Advertising- BrandMuscle

What Is Co-op Advertising?

What Is Co-op Advertising?

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.

How Co-op Advertising Works

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.

What Are the Benefits of Co-op Advertising?

Although co-op marketing programs can require a lot of investment to set up, the benefits of leveraging a strategic fund management platform to help channel partners locally market a brand are worthwhile. Benefits include:

  • Lower advertising costs
  • When marketing and advertising assets are shared through a co-op program, it reduces the brand’s creative expenses. Enforcing the use of pre-approved print providers for point-of-sale marketing materials also streamlines the time and expenses required to produce, store, and ship physical advertisements. Finally, a co-op advertising program’s set of rules can help channel partners spend their co-op funds on the most effective marketing tactics so that less money is wasted on tactics that don’t generate significant revenue.

  • Hyper-local brand awareness

  • One of co-op adverting’s most invaluable benefits is hyper-local brand awareness. Increasing marketing participation among channel partners activates a brand at the local level, increasing its presence in places that would otherwise be challenging to reach. The sharing of brand and legal approved assets also ensures that the brand’s integrity is not lost in translation, so customers can have a consistent brand experience no matter where they are in the world.

  • Campaign performance analytics

  • An advanced co-op fund management platform can provide insights and analytics down to the local level, empowering brands to understand how participants are spending their co-op funds and how their investments are performing. However, brands that are still managing their co-op marketing program with spreadsheets or outdated technology may have more difficulty accessing campaign performance analytics and may not know if partners are spending their funds at all.

  • Growth

  • By driving sales and brand awareness, a co-op marketing program can help both brands and channel partners grow. In fact, The State of Local Marketing Report found that partners whose businesses increased 10% or more attribute co-op marketing as critical to their success.

Co-op Advertising Best Practices

Not all co-op marketing programs are built the same. Many brands struggle with poor funds utilization, frustrated partners, and lackluster ROI. Successful brands often use these best practices as the foundation of their co-op program:

  • Provide transparency into available funds
  • If channel partners can’t see their funds, they won’t use them. Provide transparency into available funds so that channel partners realize they have resources available and are more inclined to spend their co-op funds. One way to do this is by managing your co-op with an easy-to-use platform that automates funds availability and sends email reminders for partners to engage with the marketing program. If it’s overly complicated to check their balance — for example, if they have to email corporate or look through spreadsheets — partners may not even bother.

  • Keep co-op program rules simple

  • Having too many rules in place for participation can complicate the entire fund management process for channel partners and discourage them from marketing at the local level. The most effective co-op marketing programs have simple approval processes so channel partners can receive reimbursement quickly, straightforward guidelines for using brand assets and tactics so partners know what expectations they must meet, and flexibility to use different vendors for fulfilling their needs.

  • Offer ongoing marketing support to channel partners
  • Research revealed 58% of partners feel training and education about marketing are limited. Because many channel partners do not have the know-how or human capital to take advantage of modern marketing tactics, offering ongoing support is crucial for equipping them to get their marketing off the ground. Some brands provide regular training sessions. Others have an agency partner that can help with the finer details of executing local marketing, like demographic targeting for digital ads or content creation for social media. Another way to support partners is by giving them access to pre-approved customizable artwork that they can easily tailor to their specific location and audience.

    Many mistakes can undermine a co-op marketing program’s effectiveness: lengthy ad approval processes, claims processes with lots of paperwork, confusing reimbursement requirements, unclear brand guidelines, manual or outdated fund management systems, and lack of incentives for partners to put co-op dollars toward the most effective tactics.

How Co-op Accruals Work

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.

How to Manage Brand Guidelines

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:

  1. Create clear rules for written content and visual assets in order to establish your corporate baseline for brand consistency. Rules should specify the parameters about how the brand should be represented.
  2. Organize your pre-approved marketing assets in a centralized location, such as a brand management platform.
  3. Create a shared marketing calendar for planning around campaigns and promotions, and to keep everyone on the same page, and define clear workflows.

How Does Prior Approval Work?

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.

How to Get the Advertiser Reimbursed

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.

Want to Learn If Co-op Advertising Is Right for Your Brand?

Contact BrandMuscle to learn more about how to build a successful co-op advertising strategy and activate your brand at the local level with our TCMA software solution.