Co-op advertising (cooperative or manufacturer's advertising) is an agreement between a retailer and a manufacturer (OEM). The two parties work together to promote products. One of the most common examples of this can be seen in the automotive industry. OEM’s like Ford and Subaru offer co-op advertising reimbursement programs to car dealers that sell their vehicles. Over the last 10 years, much more of that co-op advertising spend has moved from television to digital presenting new challenges for retailers and dealers.
Sometimes, the manufacturer will reimburse 100% of your co-op advertising spend if you meet their advertising requirements. Either way, they agree to feature certain products at designated times during that promotion. Co-op programs can be highly effective when done right—and very costly and time-consuming when not handled properly.
Co-op advertising is often tricky and can prove to be more trouble than it's worth if you don't know what you're doing. Here are nine tips all agencies should know about managing co-op advertising.
Think Of The Campaigns As Marketing Initiatives
Rather than thinking of your ad placements as individual campaigns, consider them a larger marketing initiative. That way, you'll be able to look at how various groups of sites and channels work together to get your product in front of consumers.
It will also help with measurement and reporting; for example, are you seeing more sales from one media channel than another? If so, a particular channel is likely performing better than others.
Treat Your Vendors Like Partners
Your agency and its clients may be one of the most important relationships you have, but a good working relationship with vendors can also make or break an effective campaign.
Ensure to foster a healthy partnership with your co-op vendor as soon as possible after you begin working together; both of you will want to ensure that any logistics issues are addressed early on, so they don't create problems down the road. Make sure you stay up-to-date with the manufacturer co-op guidelines and keep a close communication loop with them.
Also, don't be afraid to advocate for your clients if you feel something isn't right: You're there to look out for their best interests—and making sure they get what they paid for is part of doing that.
Leverage Each Other's Strengths
In a way, agencies and dealers are very much alike. Each group has strengths, and each group has weaknesses. There's no reason these two entities shouldn't leverage one another to make their respective businesses more efficient and profitable.
This isn't just a smart move for efficiency; it also fosters stronger creative relationships with marketers. If you're an agency interested in taking part in co-op programs, or you're a brand manager interested in working with an agency, take notes on how you can complement one another's offerings to grow your respective businesses even further.
Set Expectations And Guidelines
Co-op doesn't work without agreement between you and your client. For example, you need to decide if it's a one-time thing or will continue for an extended period. It's also important to agree on whether you can adjust the creative based on OEM feedback, such as adding more imagery or changing copy to fit co-op guidelines.
Keep A Healthy Cash Flow
Co-op advertising is a major sales channel for many product manufacturers. It accounts for billions of dollars in marketing spend each year. The biggest challenge companies face when selling co-op advertising programs? Keeping a healthy cash flow and getting OEM co-op approvals.
Before you sign on to any new clients, make sure you have a process in place to manage their budgets and track their spending. You'll want to make sure that your payment terms are clearly defined upfront.
This will help ensure that everyone stays on track, gets approvals and gets paid/reimbursed on time.
Stay Involved Throughout The Co-op Advertising Process
If you have to do something, do it yourself. At least, that's what some advertisers believe. Advertisers and marketing executives often refer to media and agency co-ops as joint buys. However, if your agency is running a joint buy for you, you are abdicating your role in managing your account's ad spend.
It is important to be actively involved in any program your agency runs on your behalf as an advertiser. You need to make sure every ad gets delivered correctly and can identify issues as they arise so they can be addressed before too much damage is done to your bottom line.
Know When To Walk Away From A Potential Partnership
At some point, you will find yourself approached by an organization or business that doesn't match your values. Despite their great offer or partnership potential, it is best to walk away from these situations.
Even if you have a mutual benefit to gain from working together, your brand can suffer if it isn't aligned correctly and expectations aren’t met.
Use Incentives Carefully Within Co-op Advertising Creatives
There's a big difference between rewards and incentives. Rewards are based on doing work that is core to your brand's mission, such as referring a friend to our website and receiving $25 off your next order.
Incentives tend to be focused on driving specific actions or activities—like filling out an entry form in exchange for a chance to win $1,000—that aren't necessarily related to achieving broader marketing goals.
Incentives can encourage participation in programs at first, but they often lead people to ignore information you send them later because they figure you'll always offer another reward.
Choose Products That Won't Hurt You If They Don't Perform
If you're a retailer looking to do a co-op ad campaign, it's important to choose brands that won't hurt your bottom line if they don't perform. While big brands have huge marketing budgets and get most of their customers by word of mouth, many small companies rely heavily on promotions and will use an ad campaign as a major way to reach new customers.
At the end of the day, 50% of OEM Co-op dollars aren't taken advantage of because it's too much work to get claims approved. That equates to about $70 billion dollars this year.
OEMs have made the programs even more complicated due to spend reductions caused by the pandemic. Dealers and agencies have to find ways to reduce the complexity of the claims process and save time on things like screenshots and reporting. If they can do that, co-op advertising can be a game-changer for both agencies and dealers.