Excellent primer on cooperative advertising by Steve Strauss of USA Today,reprintedin today's RADIO SALES TODAY newsletter from RAB:
Co-op Advertising is a Great Way to Increase Visibility
Q: I was wondering if you could tell me how co-op advertising works? Maggie
A: If you have never heard of co-op advertising, pull up a chair
-- you are about to learn of an amazing, and highly affordable, way to
get the word out about your business.
Let me illustrate it with a little story: I once knew the owner of a
small pet store who was having a very rough go of it. Sales were down,
the economy was in the doldrums, budgets were tight. (Sound familiar?)
One day, a representative for a major dog food company came in the
store, looking to create a new customer. But aside from offering a good
product, the rep also came armed with a bucket of co-op advertising
funds. The rep explained that if the shopkeeper would begin to carry the
dog food in his store, the manufacturer would support the effort with
this deal: If the store mentioned the dog food in its ads, the dog food
company would help pay for the ads.
The rest, as they say, is history. The store owner knew a good deal when
he saw one. He took the rep up on the offer and began an ad blitz. The
manufacturer paid for 60% of the ads and business boomed. A relationship
was born. The owner ended up opening three more stores, and credits
much of the turnaround to that first co-op ad campaign.
Co-operative advertising is an arrangement between a manufacturer,
wholesaler, or distributor and a small business whereby the wholesaler
helps to pay for some or all of an ad run by that business (typically,
the amount paid for by the wholesaler is 50% and up, and 100% is not
unheard of.) The catch is that the wholesaler's product must get a clear
mention in the ad, i.e. "Now Featuring Organics® All Natural Dog Food!"
Literally billions of dollars are available every year in co-op ad funds, and they can be used in just about any medium:
Television and radio
Newspapers and magazines
Yellow Page and outdoor ads
Internet and e-media
Aside from money, the wholesaler may assist with graphics and
point-of-purchase displays, as well as ad creation and even
media-buying.
It is no surprise why retailers love co-op advertising – it allows them
to advertise at the fraction of their normal cost. But that's not all.
Not insignificantly, the opportunity to co-brand with leading
manufacturers is a big part of the attraction. Customers like brands.
Brands lend credibility. As such, co-op advertising allows small
businesses to build their brand via co-branding.
What's in it for the manufacturer? Plenty. Co-op advertising sells
product. It helps foster relationships with their distribution channel,
the small business retailer. It also helps build their brand in a local
way: By teaming with local small businesses, the national brand gets a
homier feel.
If co-op advertising intrigues you, understand that there are strings
attached. The ad may need to be made in a certain way to meet the
wholesaler's criteria, or their product may need to take up a certain
percentage of the ad for the ad to be eligible for the co-op
reimbursement. (That is correct -- co-op funds work as a reimbursement
rather than an up-front payment.) And don't worry if you think that your
wholesaler does not engage in co-op advertising -- they may, and even
if they don't, they may nevertheless be interested if you explain it to
them.
In any economic climate, but especially in tough economic times, co-op
advertising is a smart way to get a big bang for your advertising buck.
(Source: Steve Strauss, USA Today, 10/21/10)
What's In It For You: The RAB's Co-op Directory is an excellent place to begin your co-op search. However, there are a few caveats:
-- Not every manufacturer chooses to list their co-op program in a
directory. If you can't find the program listed, have your retailer put
you in touch with their vendor/manufacturer representative to see if
they have an active co-op program.
-- There has been a downturn in co-op advertising partly due to the
recession and partly due to other marketing methods used by
manufacturers. There have also been personnel layoffs and/or department
mergers since the listed program was last updated. Don't be surprised
if the co-op contact person has changed.
-- Not all retailers are informed that co-op money is available. Some
manufacturers are selective with whom they engage in co-op advertising.
It's common that small retailers will not get co-op money because the
manufacturer deems them too small in volume of product for the cost of
the co-op. The Robinson-Patman act does not prevent manufacturers from
setting eligibility tiers.
-- Not all manufacturers reimburse co-op money in a timely manner. Some
retailers have been known to wait 60-90 days for their money. In some
instances, manufacturers have refused to pay co-op money if a competitor
was also listed in the ad or the ad did not meet the specifications of
the manufacturer.
-- Many manufacturers are opting for other methods of advertising and
marketing than co-op advertising. Print media has had significant drops
in circulation and manufacturers are leery of print outlets that are
losing subscribers. Improvements in the social media outlets are hugely
responsible for this shift. Some of that money is also now moving into
event marketing, sampling, and other areas that can be reached through
your Alternative Revenue/NTR efforts.
