Co-op advertising is short for “cooperative advertising”. Co-op advertising is an arrangement between a manufacturer (or distributor) and their reseller to market a product or service for the benefit of both parties. Typically, a manufacturer will give their resellers some portion of money (either through reimbursement, discounted purchase price, or some other form of financial arrangement) in order to market their products.
Co-op advertising can be a very powerful tool for the local business owner. By definition small businesses lack resources, and most small business owners are responsible for many if not all parts of business operations. Developing marketing campaigns, messaging, creative, and then executing this marketing effort is usually only thought of while lying in bed at night trying to not worry about keeping the business going.
This is where co-op advertising comes in. Utilizing the much larger resource pool of the manufacturer which has developed marketing campaigns and provide added funds from such an agreement can improve the quality of advertising, broaden the scope of its distribution and execution, and drive partnership between the manufacturer and reseller. It can also create important links between products and the small business owner who handles the product for the manufacturer. Above all, it can attract customers loyal to a certain product to a vendor whose name had not before been associated with that product.
All manufacturers and distributors have certain rules that resellers must follow in order to be in compliance as receive their co-op advertising funds. These rules vary from manufacturer-to-manufacturer and industry-to-industry. All of these programs require proof of performance in order to get co-op marketing funds, and many co-op marketing programs require prior approval before executing co-op marketing campaigns. Some of these restrictions, guidelines, and rules concerning proof of delivery is why an estimated $14 billion in available co-op marketing funds go unused every year. The friction and paperwork sometimes required by an already overwhelmed business owner is also a contributing factor.
If you work in marketing or own a business that sells products, you’ve probably heard the term “co-op advertising” thrown around. But what exactly does it mean?
Co-op advertising refers to a powerful marketing strategy where manufacturers and retailers pool resources to market and advertise products together. Through co-op programs, manufacturers provide funds and marketing assets to retailers to help them promote products locally.
In this comprehensive guide, we’ll explain everything you need to know about co-op advertising including:
- What co-op advertising is
- How co-op advertising works
- The benefits of co-op programs
- Best practices for managing co-op funds
- How to get your marketing materials approved
- Tips for getting reimbursements for ad spending
Let’s dive in and demystify this valuable marketing collaboration technique.
What Is Co-Op Advertising?
Co-op advertising, also known as “cooperative advertising”, is a strategic collaboration between product manufacturers and their retailer partners.
Under a co-op program, the manufacturer agrees to share the cost of advertising and promotional campaigns for their products run by local retailers. They also provide marketing assets like logos, images, and ad copy to support the retailer’s efforts.
The “co-op” refers to the cooperation and sharing of resources between brands and their distributors, dealers, or retailers to market products. This helps reduce the advertising costs for channel partners, allowing them to invest more in impactful local marketing campaigns.
Co-op advertising allows big brands to extend their marketing dollars into local markets by funding their retail partners’ advertising efforts The retailer benefits from reduced advertising costs and access to high-quality marketing materials
Ultimately, co-op advertising helps drive greater product visibility and sales in hyper-local markets by empowering retailers with the resources they need for effective campaigns
How Does Co-Op Advertising Work?
So how exactly does the process of co-op advertising work? Here’s an overview:
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The manufacturer sets up a co-op advertising program with rules about reimbursement rates and how funds can be used.
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Retail partners accrue co-op funds over time based on a percentage of total purchases from the manufacturer The more products they buy, the more co-op funds they earn.
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The retailer develops local marketing campaigns featuring the manufacturer’s products. This can include print ads, digital ads, out-of-home ads, radio spots, and more.
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When they’re ready to run the ads, the retailer submits the materials to the manufacturer for “prior approval” to ensure they meet brand guidelines.
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Once approved, the retailer runs the ads and promotions in their local market.
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Afterwards, they submit a claim to get reimbursed for part of the ad cost using their accrued co-op funds.
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The manufacturer reviews the claim and sends the retailer a reimbursement check to cover the approved amount.
This entire process is made simpler when managed through a centralized online platform. Software can automate tracking of co-op funds, prior approval workflows, and reimbursement.
Key Benefits of Co-Op Advertising
There are many excellent reasons for brands and retailers to participate in cooperative advertising. Benefits include:
Lower Advertising Costs
- By pooling resources, both parties save money on creative development and advertising placements.
Effective Local Brand Awareness
- Hyper-local marketing powered by co-op ads help brands penetrate local markets.
Performance Analytics
- Digital co-op advertising provides data on ad performance and customer actions.
Growth
- Co-op programs drive increased sales and brand awareness.
Strengthened Relationships
- Collaborative marketing brings brands and retailers closer together.
For retailers, reduced ad costs mean they can reinvest savings into amplifying campaigns. For brands, they gain exceptional local reach while keeping advertising affordable.
Best Practices for Co-Op Advertising
To maximize results from your co-op program, keep these best practices in mind:
Offer Transparency into Available Funds
Let retailers clearly see their available co-op dollars so they can plan campaigns accordingly. Automating this through a portal is ideal.
Keep Program Rules Simple
The easier the participation process, the higher engagement you’ll see. Allow flexibility in vendor and tactic selection.
Provide Ongoing Marketing Support
Give retailers access to training and assets to improve performance. Have marketing experts assist them in crafting impactful campaigns.
Automate and Track Everything
Leverage software to optimize workflows, provide insights into fund usage, identify high-performing tactics, and showcase your ROI.
Communicate Often
Frequently inform retailers of available funds, new product launches, and marketing initiatives so they stay engaged with promoting your brand.
Following these best practices will help ensure your co-op advertising program delivers spectacular results.
How Do Co-Op Accruals Work?
A common question is how do retailers accrue co-op funds over time? Here’s how it works:
Co-op accruals are based on a percentage of product purchases from the manufacturer over a defined time period. For example:
- Acme Brand offers a 15% co-op accrual rate
- Over one year, Retailer X purchases $500,000 worth of Acme products
- So Retailer X has accrued $75,000 in co-op funds for the year (15% of $500,000)
Accrual rates often range from 2% to 5% of purchases, but can sometimes be higher. $75,000 gives Retailer X considerable budget to create local ads featuring Acme products.
Accrued co-op funds that go unspent may roll over year to year. Brands specify expiration periods for unused accruals in their program policies.
How Can Retailers Get Ads Approved?
To ensure brand consistency, manufacturers require retailers to get approval before running any co-op funded ads.
Follow these steps for smooth ad approval:
Review Brand Guidelines
Study the manufacturer’s branding rules for typography, logo usage, imagery, messaging, etc. Adhere closely to their guidelines.
Develop & Submit Creative Concepts
Create ad concepts and designs and submit them through the co-op portal for the brand to review.
Obtain Prior Approval
The brand will review for compliance with their guidelines and either approve or ask for revisions.
Make Any Necessary Edits
If the brand requests changes, make them right away. Be sure to get final approval before placement.
Place Your Ads!
You’re now cleared to run the co-op ads locally. Follow all inclusion instructions.
Gaining prior approval takes a bit of back and forth but ensures your ads align with brand expectations. This streamlines reimbursement.
Tips for Getting Co-Op Claims Approved
Once you’ve created and placed approved ads, it’s time to get reimbursed for that spending using your co-op dollars. Follow these tips for smooth reimbursement:
Read the Guidelines
Verify the brand’s claim policies. What proof is needed? Are there spending caps? Do digital ads require performance reporting?
Submit Claim Forms Completely
Provide all required info and documentation. Incomplete claims will slow down processing.
Include Valid Invoices
Submit media invoices that show exact ad cost, flight dates, and details like ad dimensions or call tracking numbers.
Meet Submission Deadlines
Co-op claims often require submission within 6 months of ad placement. Missing deadlines can lead to denied claims.
Only Claim Approved Ads
If you placed ads without prior approval, they won’t qualify for reimbursement so don’t claim them.
Follow Up on Status
Politely follow up if your claim is taking longer than typical to be processed. Communication helps move things along.
With proper documentation and by following program guidelines, you can get the most out of your co-op advertising funds.
Ready to Launch an Effective Co-Op Program?
As you can see, co-op advertising is an incredibly valuable collaboration between brands and retailers. When done right, all parties can save money on advertising while driving substantial growth through hyper-targeted local marketing campaigns.
But running these complex programs manually using spreadsheets is inefficient. Modern brand management software makes executing co-op advertising simple and streamlined.
If you’re ready to maximize the return on your co-op program, let’s connect. We’d love to show you how our automated platform can help you and your retail partners thrive through cooperative advertising.
Benefits of Co-op Advertising
The benefit to the manufacturer is that they are selling more products and services through their reseller channel, and the benefit to the reseller is that the manufacturer is offsetting some (and sometimes all) of the investment of the advertising.
There are many other benefits to this arrangement:
- Manufacturers will craft the messaging, design, and even the offer for the resellers so that the messaging is controlled and universal through the reseller network
- Resellers get the benefits of being able to use the marketing assets and expertise of the manufacturer without the expense and effort of creating marketing themselves
- Both parties benefit from less expensive advertising (since both parties bare some of the investment)
- Manufacturers benefit from the resellers’ local knowledge of their markets, thus making the marketing more efficient through local buying
- Resellers may benefit if the manufacturers have negotiated lower rates based on marketing through large networks across many markets
- Manufacturers get more distribution and a wider amplification of their marketing messages with dozens, hundreds, or even thousands of resellers marketing in their local areas
- Local businesses can increase their legitimacy and reputation by aligning themselves with well-known, respected brands and create a halo effect which then increases the sales of their other products and services
The Industry-Standard Solution for Co-Op Advertising for Over 35 Years
Co>Op Connect is a full-service provider of customized co-op advertising solutions. We provide our clients with everything they need to increase sales through co-op advertising. Co>Op Connect celebrates the spirit of teamwork, reliability, excellence and value by continuing to systematically improve with expertise, technology, strong leadership and great team members.
What Is the Importance of Co-Op Advertising?
What is co-op advertising?
Co-op advertising is a strategy where product manufacturers or distributors pay a portion of advertising costs for a retailer to advertise their products. Sometimes, these manufacturers pay the entire cost and provide several marketing materials for the retailer to use.
What are the different types of co-op advertising?
There are two main types you may want to consider. In horizontal co-op advertising, you have two (it could be more) types of retailers that share the costs of the ads. It’s useful if they both stock the same product. For example, maybe two franchisees share the costs of ads across a regional boundary.
Is your brand considering co-op advertising?
If your brand is considering co-op advertising here’s everything you need to know. What is ‘Cooperative Advertising’? Cooperative advertising is when multiple brands collaborate together to form a mutually beneficial promotion. Usually manufacturers distributors or wholesalers offer retailers support for promoting their products.
What is a cooperative advertising campaign?
Usually manufacturers distributors or wholesalers offer retailers support for promoting their products. This form of marketing is mutually beneficial and provides a cost-effective way for manufacturers and retailers to run promotions. Cooperative advertising campaigns can vary from a few ads to a full-scale marketing campaign.
