Great Business Ideas: Take Advantage of Co-op Advertising

Great Ideas for your Small Business:

Take Advantage of Co-op Advertising

Do you ever wonder how local merchants get their name and address in the corner of glossy ads for a car, computer, or watch? They do it through what’s called “co-op advertising,” and this form of cost-sharing has given small business owners a marketing boost for years.

Ad agency executives say companies like Omega, the high-end watchmaker, “tag” 100 percent of their print ads with the names of local retail suppliers, because they don’t have their own boutiques to sell watches. “It’s a kind of dual extortion,” said Eric Dochtermann, chief executive of Katz, Dochtermann & Epstein, a Manhattan ad agency. “The retailer wants support, and the manufacturer wants the retailer to lay out money.”

Dochtermann, who also works with Dress Barn and Bara- mi Studio, said retailers typically spend 3–10 percent of the total sales of an item on co-op advertising. By hooking up with a big manufacturer, they can get more bang for their advertising bucks and significantly more exposure. “For the manufacturer, it’s the 80/20 rule—you spend more money on your big clients,” Dochtermann explained.

To qualify for inclusion in a co-op program, retailers have to stock enough of the product to be considered a major player. In other words, if my slick ads are driving customers into your store, I expect you to stock enough of my products to meet the demand.
Many ads, especially those in magazines, are redesigned for specific regions, so local retailers benefit. A dealer in Denver wouldn’t want to be listed in an ad appearing in an Atlanta newspaper.

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One Omega retailer who took advantage of co-op ads is Refeal Solly, owner of Daniele Trissi Ltd. in Scarsdale, New York. Information about his store is featured in Omega posters prominently displayed on the Metro North railroad. “The people who commute every day see these ads again and again,” said Solly.

Solly, who opened his jewelry store in 1977, said Omega approached him about the co-op ads several years ago. He declined to discuss the financial details, but said he likes being part of the program. “Ads in the New York Times are prohibitively expensive to a small business,” he said. “This is the only way advertising can be affordable.”

Meanwhile, Dochtermann said high technology may jeopardize the future of co-op ads. Why? Many big companies now have their own websites that allow customers to collect product information and quickly access a list of local retailers. “With so much retail happening on the phone, over the Internet, and by mail, tagging becomes less valuable as an advertising tool,” said Dochtermann.

It’s a good idea to check with all your major suppliers to see if they have a cooperative advertising policy. Most manufacturers have some kind of program to offer retailers. Even the biggest companies in the world want to split the advertising costs. Hewlett-Packard, for example, relies on major co- op deals with Intel to promote the Pentium processors inside its computer equipment.