Out of the Box

Who’s Paying for the Advertising?

By Menachem Lubinsky on June 21 2010

Harriett, the accounts payable executive at a medium-size appliance store, did what she normally does to bills that come in for co-op advertising. She made a copy of the bill and forwarded it to one of the manufacturers that they carry to reimburse her for 40% of the bill. Within a week, she received a shocking response: “In reviewing the advertisement, we were not satisfied with the size and resolution of our logo. Please review the terms of our co-op advertising agreement for the specific requirements of our participation.” The bottom line was that the manufacturer refused to pay their share of the bill.

Michael, a food distributor, knew that the success of a new energy drink he was representing depended on solid marketing. While the drink competed with many well-known brands, its low sugar and natural flavors gave it a shot at success. The manufacturer had promised to “participate” in a marketing program, but as Michael found out they had made no specific commitment. Save for an initial $3000, the manufacturer refused to participate any further. The product ultimately failed.

Harriett and Michael were both victims of failed co-op advertising programs. They simply missed out at what can be one of the most effective marketing tools for any business. When it works properly, it can help a business leverage their own advertising dollars into a much larger marketing effort. Co-op advertising today is not just a shared program between retailers and distributors or between retailers and manufacturers; it is used today to bring together any two or more entities that benefit from a shared advertising program.

Although Harriett had been billing the manufacturer for years without any problems, a new marketing manager at the plant apparently decided to strictly enforce the terms of the co-op agreement. For the manufacturer, co-op advertising is part of an ongoing branding program and also a means of leveraging dollars and goodwill from the retailers that sell their products. It is important to them that the retailer follows their requirements for their branding. I have seen co-op agreements that specify that ads must be on the left side of a newspaper and others that mandate the font that is to be used in ads.

Michael apparently trusted the manufacturer and failed to formalize an agreement which turned out to be a big mistake. The manufacturer wanted to see how committed the distributor was and apparently believed that the small investment that they made would be sufficient. Michael on the other hand was handicapped from the first moment without any commitment from the manufacturer.

Marketing studies conclusively prove that co-op advertising or co-op marketing for that matter works. It can be a win-win for both participants and make a huge difference in the ultimate success of the product. But it works best when both parties are committed and on the same page.

Perusing through a newspaper recently, I found many examples of co-op advertising that is not exactly the way Harriett and Michael used it. A car dealership, for example, teamed up with a local car wash. A bank promoted two restaurants in the area, with the two eateries participating in the cost of the ads. A linen store appeared to have joined a furniture store.

Many large businesses use co-op advertising as a means of demonstrating that they are part of a broader community. They routinely sponsor charitable events and causes with their logos prominently displayed on ads and promotional literature. Once again, they rely on the reach of the charities to broaden their own exposure and even here carefully monitor the positioning of their logo and other symbols that are part of their branding.

Many franchise owners chose that course precisely because of the co-op advertising which in many cases may turn out to be more than just 50%-50%.Even in franchises, lawyers caution that the precise language of the agreement is critical. People typically opt for owning a franchise because so much of the business is cared for. It is also the reason that hotel owners chose to affiliate with a large chain. As one marketer once put it: “It’s the safe way to be in business, although their success will also be guided by good business practices.” One franchise owner said that he felt as if he was “always under the microscope.”

Although most business people are apt to recognize co-op dollars as part of an advertising program, there is increased participation in such programs in many other marketing initiatives. Some co-op programs, for example, involve public relations but again there may be specific requirements about language that must be included in press releases. In today’s world of technology, there are many opportunities for joint participation through banners and links on Web sites and even cross referencing in blogs, Twitter and Facebook.

Of late I have also noticed an increase in joint promotional programs by a charity and a business and even two charities. There was, for example, a joint contest sponsored by two charities that was prominently promoted in the media. There was also a joint promotion between a charity and a book publisher. With business still reeling from the effects of the economy, co-op marketing may be the way to go.

Out of the Box is a collection of strategic marketing articles that Lubicom has published on various topics, trends and ideas in the marketing world. The articles have been published in the Hamodia weekly newspaper circulated on three continents to a readership of well over 100,000.

The name, "Out of the Box" is a term used frequently in business nowadays to describe creative thinking that is not the norm. It is meant to help a business pull away from the pack or separate oneself from the competition. It is to some extent fraught with risk, simply because it is not the run of the mill thinking, but it is at the same time the key to reaching the next opportunity.