What Is Cooperative Advertising And How Does It Work?

Each year, $70 billion is spent on cooperative advertising. This eye-watering figure is likely to increase further throughout 2021 and beyond.

As a result of the pandemic, brands and retailers in many industries are struggling, so it makes budgetary sense for them to bring their resources together.

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.

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.

In the world of eCommerce, more and more manufacturers are helping retailers with the likes of search ads, influencer campaigns and PPC banner placements.

How does cooperative advertising work?

The terms of each co-op marketing partnership will vary depending on the policies of the manufacturer involved. Here’s an overview of what you can expect.

The financial bit

Generally, the manufacturer will cover a large chunk of the advertising expenses and provide images, videos and other media assets that can be used in the ad.

They may also contribute perks that will drive traffic to your online store, such as free gifts, brand exclusives and other promotional offers.

The amount of funding made available depends on the size of your online store and its sales record. Some manufacturers may cover all the campaign expenses, but it’s more common for the two parties to share costs.

What’s the catch?

Today, manufacturers usually lead the way when it comes to co-op marketing. They often specify the kind of advertisements they want, as well as other expectations and the amount they’re willing to contribute.

Usually, they clearly set out requirements around how their products and logo should be presented. Big brands tend to have more restrictive requirements.

Cooperative advertising trends

As traditional retail declines and eCommerce grows, the nature of co-op marketing is changing.

Manufacturers now seek out online retailers and engage in digital advertising. Google Ads has even set up a shopping campaigns feature to facilitate these partnerships. This connects retailers with manufacturers that want to contribute to their advertising budgets. (Registration for the beta programme is available here.)

Some powerful retailers like Walmart and Wayfair are going even further by starting retail media platforms. These allow manufacturers to pay for advertisements on their websites.

The benefits of co-op advertising

When done right, co-op advertising benefits everyone involved. By bringing their buying power together, retailers and manufacturers can either cut costs or reach a lot more people. Either way, sales should increase.

Let’s take a closer look at some of the benefits of cooperative advertising.

1. Lower costs

When manufacturers contribute to the cost of advertising, retailers don’t have to spend as much. The cost of ad creation is often covered or shared too.

Whether your co-op marketing focuses on PPC ads, billboards, OTT advertising or influencer Instagram posts, retailers can reach a large audience for a lot less money.

2. More exposure

Retailers who pool their money with other businesses also get more bang for their buck.

You can afford to invest in advertising campaigns that generate more exposure for your store. If you’re spending more, you’ll often get better value for money from traditional advertising mediums, like television and radio. This means you’ll reach more people and achieve a greater (ROAS) Return on Ad Spend.

Manufacturers and retailers can also combine their data to optimise their campaign performance. When Estée Lauder partnered with a leading retailer, the click share of its Google ads increased by 70%. They managed to win the digital shelf despite the holiday season’s stiff competition.

3. Positive associations

Undertaking co-op advertising with a popular brand name can push up consumer trust in a retailer. It can even boost its cool factor!

By associating your online store with other well-established brands, retailers can increase awareness and reach new audiences. You can appeal to a brand’s loyal fans and followers through association too.

The drawbacks of co-op advertising

While cooperative advertising comes with a lot of perks, not every partnership proposition is ideal. Here’s some of the drawbacks to consider before committing to a joint campaign.

1. The red tape

Some manufacturers have restrictive requirements when it comes to cooperative advertising, so retailers need to know exactly what they’re agreeing to.

Certain manufacturers insist on approving each ad before it goes public, while others have difficult demands around product presentation.

These issues are easily overcome through strong communication and adherence to the rules set out at the beginning of the partnership.

2. Creative differences

While both retailers and manufacturers have the same goal in mind, they won’t always agree on how to achieve it.

Producing the perfect ad can be difficult when just one marketing department is involved. But when two come together, diverging views on branding and style are even more likely.

Retailers need to check in with their partner at each stage of the production process. This allows them to resolve any issues before too much money is spent. Manufacturers may even have creative assets that will save time and money. They may prevent disagreements too.

3. The risk of brand erosion

With co-op advertising, retailers need to share the limelight with manufacturers. This results in reduced visibility for both partners.

Before agreeing to a cooperative marketing campaign, retailers need to ensure that the approach fits with their eCommerce marketing strategy. While the financial incentives are tempting, retailers need to ensure it contributes to their overall business goals. Otherwise, they risk damaging their brand image.

Some examples of co-op advertising

While co-op marketing can come in many forms, here are a couple of eCommerce examples to inspire your future partnership plans.

Chewy.com

According to company filings, online pet food retailer Chewy.com partners with its main suppliers to take advantage of discount purchases, cooperative advertising and market development funds.

While its store stocks over 2,000 brands, just 12 are promoted at the top of its home page. Many of these brands feature prominently in its television advertisements too.

Chewy.com is known for providing standout customer experiences, so its suppliers are happy to be associated with the retail brand. Some manufacturers even direct their website visitors to Chewy.com with a ‘Where to Buy’ solution.

Walmart and Dove

Dove’s Real Beauty Campaign is well-known for its success. And its co-operative marketing contributed to this.

The beauty brand partnered with Walmart for cross-promotions and its ads featured women who bought its products at Walmart. In 2019, the two companies also collaborated to create the world’s largest stock photo library of ordinary women and non-binary people. The project, which aimed to increase the diversity of images in the media, generated a lot of publicity for both brands.

Final thoughts

Retailers don’t have to wait to hear from manufacturers about cooperative advertising. They can choose ideal partners and seek out programmes or pitch their own ideas. Retailers that proactively chase down these opportunities are more likely to find great partners.

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