Examples of Cooperative Advertising
Cooperative advertising involves two companies sharing advertising costs. Vertical and horizontal are the two most common types of cooperative advertising. Vertical co-op programs are agreements made between trade channel partners, whereby a marketer pays a certain percentage of channel partner advertising costs. Horizontal co-op programs allow marketers to share advertising costs, frequently marketers in direct competition with each other. Both can advance your marketing goals while reducing your advertising costs.
As a general principle, channel partners expect marketers to absorb some of the costs that they incur for advertising marketers' products. If you don't have a co-op advertising program as a small-business product marketer, don't expect to get the same advertising support your competition does. Vertical co-op advertising serves a variety of purposes for the marketer. It can help you obtain new product distribution sooner rather than later. It will inspire your partners to maintain support for your existing products. It will facilitate your ability to get coveted in-store displays. When combined with trade allowances, you can build retail inventories during key selling periods.
Many traditional vertical cooperative advertising programs have migrated online, given that 68 percent of U.S. household had broadband Internet access in 2010 as reported by the U.S. Census Bureau. Thus, many families receive their weekly grocery circulars from their favorite supermarkets online as well as in print. The same applies for the "big box" retailers such Wal-Mart and Best Buy. Moreover, all online and print periodic circulars and fliers are, at least, partially funded by cooperative advertising dollars. Dedicated online retailers such as Amazon and EBay also have aggressive cooperative advertising programs that drive online sales for their participating vendors. Consequently, regardless of your mode of distribution, you could be missing huge selling opportunities by not offering co-op advertising allowances to your channel partners.
Marketers share advertising costs in newspaper supplements that are nearly ubiquitous in Sunday newspapers. Many direct mail marketing vendors and newspapers also offer targeted direct mail horizontal programs for national and local advertisers to pinpoint their target audiences down to the zip code and fractions thereof. Horizontal programs come in a variety of formats, including so-called "shared-mail' envelopes, Sunday supplement inserts, post card stacks and shopping center mall circulars.
This is a program where the U.S. Small Business Administration teams up with major corporations and organizations to promote small businesses throughout the land. Small Business Saturday encourages holiday shoppers to specifically shop small businesses in their communities between the Saturday after Thanksgiving and Cyber Monday two days later. American Express, for instance, supports this program with a dedicated website that lists all the participating small businesses in your community. Arguably, Small Business Saturday has the potential for becoming the largest horizontal advertising program in the nation. According to the SBA Administrator, Karen Mills, more than 100 million Americans shopped at independently owned small businesses during 2011's event.
Marketers must offer the same cooperative advertising programs to small retailers on a proportionate basis as they offer the large chains, according to the Federal Trade Commission. You'll discover that some of the programs are quite lucrative. Read the fine print, however, and adhere to the rules if you expect to be reimbursed. If you have any questions, talk to your vendor sales reps or directly to their marketing departments.