Cooperative Advertising (Encyclopedia of Small Business)
Cooperative advertising is the sharing of costs for locally placed advertising between a retailer or wholesaler and a manufacturer. Many manufacturers have a set amount of cooperative advertising funds available per year, distributed as opportunities for collaboration arise. Manufacturers report, however, that much of this money goes unspent, as relatively few retailers and wholesalers pursue cooperative agreements.
Cooperative advertising can be a very powerful tool for the small business owner, especially one with limited means to support the kind of advertising campaign which can be vital to the survival and success of a business enterprise. The added funds from such a cooperative agreement can improve the quality of advertising or broaden the scope of its distribution. It can create important links between products and the small wholesaler or retailer 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.
Cooperative advertising can take many forms, as Gail Smith explained in Industrial Distribution: "There are many devices with which a manufacturer can assist a distributor in product promotion, including product flyers, catalog and trade magazine ads, direct mail flyers and direct mail campaigns, electronic data for CD-ROM, trade show booth materials for customer appreciation/open house or sports events, and giveaway items, such as clothing, mugs, or sports gear. Any one or combination of the above, used with a marketing program, can effectively assist a distributor with making their customer base aware of a product."
BUSINESS NICHES AND COOPERATIVE ADVERTISING
Any small business that deals with the products of a major manufacturer (tennis shoes, perfume, ice cream, propane, computers, etc.) and engages in nationals opposed to localdvertising can benefit from cooperative advertising ventures. These terms can be deceptive, because frequently national advertising is done through local media. But there do exist clear differences between local and national advertising.
Local advertising refers strictly to the advertisement of local shops and services that are not available nationwide or over large regional areas. Small businesses that would engage solely in local advertising, for example, would be small groceries and specialty stores, or small service providers which are not linked to any national chain, such as a local dry cleaner.
National advertising, on the other hand, is advertising that focuses on nationally recognized and available goods and services. Most brand-name items would fall into this category: automobiles and machinery, designer clothes and jewelry, some services. But the actual advertisements are likely to be run only locally, to draw attention to the local provider of these national goods and serviceshe small dealership, for example, which sells John Deere tractors. It is with this type of advertising that the small business owner can seek a cooperative agreement with a national manufacturer.
BENEFITS OF COOPERATIVE ADVERTISING
The biggest benefit of cooperative advertising for small business owners, of course, is that such arrangements can dramatically cut advertising costs. Manufacturers will sometimes provide anywhere from 50 to 100 percent of the cost of placing local ads. These corporate advertising dollars can make it possible for small businesses to establish a far stronger presence in the community than would otherwise be possible.
Another benefit that sometimes results from such agreements is valuable creative and media-buying guidance. Some large manufacturers will provide help for the small business owner in refining the look and message of the advertisement, and in effectively placing the ad in a mutually beneficial way.
Finally, cooperative advertising can lend an air of legitimacy to small business enterprises. Small companies that are able to link their name with that of a nationally recognized product or service should work hard to maintain such ties, particularly if the product or service in question already has strong user loyalty.
Cooperative advertising also benefits manufacturers and service providers. Enlisting small business allies diminishes the cost of advertising for these larger companies, especially if they encourage cooperative advertising arrangements in several communities. In addition, just as local businesses can benefit from associations with established national corporations, these large manufacturers and service providers may also enjoy benefits associated with having their products or services aligned with leading businesses in a given community. For example, a designer brand of clothing may benefit from cooperative advertising with an exclusive neighborhood boutique: the personality of the shop itself will reflect positively on the product.
DRAWBACKS TO COOPERATIVE ADVERTISING
The small business owner must be careful that he or she completely understands the commitment involved when seeking a cooperative advertising agreement. Many manufacturers demand a certain style of advertising, or a high level of quality that may be difficult for a struggling business to achieve. There may be hidden requirements which must be met, or limits on the kind of advertising which can be funded by manufacturers' dollars. The specific demands involved in an advertising cooperation will vary widely between manufacturers; business consultants recommend that small business owners consult an attorney before signing any such agreements.
Bergen, Mark, and George John. "Understanding Cooperative Advertising Participation Rates in Conventional Channels." Journal of Marketing Research. August 1997.
Gruner, Stephanie. "The Secrets of Cross-Promotion: Done Well, Marketing Partnerships Can Stretch Your Budget." Inc. June 1997.
Smith, Gail. "Cooperative Advertising: An Untapped Resource." Industrial Distribution. August 1997.
SEE ALSO: Cost Sharing