Co-op (cooperative) advertising is a partnership established between the manufacturer and retailer to share the cost of advertising at the local level. It is a partnership, for example, between the Ford auto brand at the national level and the individual Ford car dealers.
Co-op assists publishers in giving their advertisers more exposure without increasing their personal advertising spend. Advertisers that qualify for co-op reimbursement are eligible for subsidies gains through accrual dollars.
Accrual Dollars: Funds manufacturers make available to dealers based on the number of items (and respective prices of those items) that the dealer sells. The funds made available can be based on the current or prior year’s purchases, or another set time frame.
Under co-op programs, manufacturers typically subsidize 30 to 50 percent of retailer advertising costs. Some manufacturers may offer between 75 and 100 percent. Manufacturer-sponsored co-op subsidies are essentially “free money” — not taking advantage of such an opportunity constitutes a waste of money.
Local retailers can accrue co-op funds based on their purchases from a manufacturer. When the retailer runs an advertisement featuring the manufacturer’s product, the manufacturer reimburses the retailer for a predetermined portion of the ad cost up to the accrual amount.
Example: Local Ford auto dealer has accrued $1,000 with Ford and decides to run an online display advertising campaign that features a 2015 Ford model. While the ad costs $2,000, it will cost the retailer $1,000 because Ford will reimburse the local dealer for the other $1,000.
The Co-Op Opportunity
Co-op presents local advertisers with a huge opportunity. With more than 4,500 co-op programs in the U.S. alone, co-op as an advertising industry segment is estimated to be worth $50 billion annually, according to SproutLoud. However, it is not a very visible form of local advertising, presumably due to the perceived difficulties in gaining access to co-op funds and creating co-op compliant advertisements.
Manufacturers are willing to subsidize the ad campaigns because their products are being promoted mutually with the retailer. For that reason, there are requirements that need to be met in order to be eligible for reimbursement.
That can sometimes mean strict brand requirements that are meant to control the look and feel of an ad, which ensure that both the messaging and format are consistent with the manufacturer’s branding.
Common requirements include:
- Depiction of a current product
- Inclusion of a manufacturer-approved logo
- Inclusion of specific promotional text
Luckily, companies like MultiAd, the Local Search Association, and AdMall have emerged to specialize in the facilitation of co-op advertising for their publisher partners. These companies enable publishers to capture more advertising revenue by making selling co-op manageable, through services such as:
- Provision of assets
- Creation of compliant ads in various formats
- The submission of campaigns for approval
- Actual campaign reimbursement
Verticals Where Co-Op Programs are Common
Because co-op programs reflect cooperation between a retailer and the manufacturer of the goods sold at the retailer, programs span many different types of retail categories. That being said, a few verticals have significant amounts of co-op dollars available. Example verticals and manufacturers:
- Auto (e.g. Volvo, Ford)
- Home Improvement (e.g. Jenn-Air, GE)
- HVAC (e.g. Trane, Lennox)
Ad Spend Across Advertising Channels
Local advertisers can qualify for co-op reimbursement across an extensive variety of channels, depending on the manufacturer in question. These include:
- Digital (Display, SEO, SEM)
- Broadcast (TV, Radio)
- Print (Magazines, Newspapers)
- Outdoor (Billboards)
In the past few years, an increasingly large percentage of available co-op dollars are being funneled into digital. In fact, major manufacturers like Ford Motors are requiring that local dealers devote at least 50% of co-op advertising spend to digital. According to industry experts like MultiAd, the trend will only continue!