Co-op Marketing: Answers to Common Questions

Cooperative marketing is a strategy that can benefit businesses of various sizes in many different types of industries. You likely see examples of it all around you, but might not recognize it as co-op marketing or think about the many steps required to launch a cooperative marketing campaign.

Cooperative marketing is a strategy where two or more businesses collaborate to promote a product, service or brand, sharing resources, costs and benefits. Common examples include co-branded advertisements, bundled promotions and cross-promotions between complementary businesses. It also could refer to a down-channel partnership, such as that between a parent company and its franchisees.

▶ Dive deeper into the definition of cooperative marketing.

If you are considering participating in an existing program at your organization or are thinking about starting your own program, you may have many questions. 

Following are answers to common questions about cooperative marketing that may help you decide if it’s right for your organization.

What are the benefits of cooperative marketing?

It helps partners expand their reach, reduce marketing expenses, increase sales revenue and enhance credibility through joint efforts. Benefits include:

• Shared marketing expenses
• Increased brand exposure
• Access to new audiences
• Enhancing trust through association with the partnering organization
• Improved resource efficiency

Is there a difference between cooperative advertising and cooperative marketing?

It is the same as the difference between marketing and advertising. Marketing is the overarching term, while advertising is the specific act of promoting an organization through paid channels. Marketing strategies often include advertising. 

What should be included in a cooperative marketing agreement? 

The agreement should clearly define each partner's roles, responsibilities and financial contributions. It should also outline performance metrics, branding guidelines and conflict resolution mechanisms.

Following are key elements to include:

• Partnership scope, including objectives and duration
• Roles and responsibilities, including those for performance data analysis, reporting methods and reporting frequency
• Cost sharing and payment terms, including budget allocation and reimbursement policies
• Branding and marketing guidelines for each organization, or, in the case of down-channel partnerships, what content should or should not be modified
• Identification of approved marketing channels (i.e. which social media platforms would be used), as well as cost split per channel
• Details about intellectual property rights, including details regarding content, logo and trademark usage
• Dispute resolution and emergency mitigation processes, as well as termination clauses
• Any legal compliance considerations based on industries and jurisdictions, as well as details about which parties would explore and be responsible for updating legal requirements

What are the challenges of co-op marketing? What are some common pitfalls to avoid?

While they offer many benefits, you should anticipate the challenges of cooperative partnerships and be proactive in preventing them. Common pitfalls include the following:

• Brand Misalignment: Before you start, ensure that your relationship makes sense.
• Unequal Contribution: Ensure that all parties agree to the written parameters.
• Control Issues: Because disagreements over marketing strategies or creative direction can arise, be sure you include conflict resolution measures in your agreement. Detail which legal counselors you will consult if needed.
• Reputation Risk: A partner’s negative publicity can impact both brands. For this reason, you should properly vet the organization before your partnership begins, and you should detail emergency response measures in your agreement.
• Financial Complications: In addition to general conflicts, one or more partners may face unanticipated financial struggles, such as the need to file for bankruptcy. To help mitigate these issues, consult with business attorneys before beginning your partnership, as the issue is occurring and after the issue is over to maintain your good name.
• Measurement Difficulties: Tracking the effectiveness of shared marketing efforts can be overwhelming, so it’s important to set goals from the onset and identify which tools you will use to track progress. Revisit the goals and realign marketing strategies quarterly based on the results of your efforts.

How much of the cost is each party responsible for?

Cost allocations depend on a wide variety of factors, including whether the partnership is between two distinct organizations or if it’s based on a parent company and its franchises. 

The best approach aligns the budget with the revenue potential for everyone in the relationship. 

What are some specific ways to allocate these costs?

When two partners are participating in a co-op marketing effort but using different marketing channels, the co-op costs are typically determined based on a mix of contribution models, channel effectiveness and strategic priorities. For example, elements like the size of the audience reached or percent of space on a direct mail piece or website are among many ways to determine cost allocations.

Following are a few ways the expense shares could be handled:

• Base them on channel-specific budgets or allocations, as each channel may have different cost structures and ROI.
• Set up proportional cost sharing based on a combination of channel cost, expected impact, usage of co-branded assets and overall campaign budget.
• Use strategic weighting or tiered incentives based on performance or budget level.
• Use a performance-based reimbursement format, whereby expenses and profits are centered on metrics such as conversions and leads generated.

What are the advantages for cooperative marketing for small businesses and nonprofit organizations?

Small organizations can benefit by having their names seen along with that of a larger brand, and they can reach more “niche” or smaller, local audiences. Additionally, by working with a large organization, they can participate in comprehensive marketing efforts that they might not have been able to afford on their own. Furthermore, the reputation of the smaller organization will get a boost due to association with the larger, more well-known organization.

What are the advantages for large businesses?

Larger businesses, such as multi-national corporations, benefit from smaller organizations’ connections with local residents and businesses. They can increase brand awareness and profitability as a result of the smaller businesses’ successes. 

Just like a smaller organization gets a reputation boost by association with a larger organization, the same is true on the flipside. A parent company’s brand isn’t always known as well as a small, local business that people trust and frequent, so associating with a small business can be just what the larger corporation needs to increase awareness of its name.

▶ Phoenix Innovate has assisted many clients through cooperative marketing partnerships. Explore the following case studies to see the results: 

• Distribution solution streamlines Howmet Aerospace’s marketing throughout 19 countries.
• Transitions promotes sample kits and educational material to 10,000-plus optometry offices in the United States.
• Phoenix Innovate helped Stellantis franchises execute brand-compliant, co-op marketing communications.

What are some examples of cooperative marketing that I might have seen in the retail space?

Four highly visible past or current partnerships include:

• McDonald’s® and Coca-Cola®
• Nike® and Foot Locker®
• Home Depot® and Behr Paint®
• Starbucks® and Target®

What are some examples of cooperative marketing with nonprofit organizations that I might have seen?

Yoplait® had partnered with the Susan G. Komen® foundation in its “Save Lids to Save Lives” program from 1998 to 2016. This was an excellent example of a partnership that made great sense, as yogurt is believed to have many health benefits for women. Another example is ESPN’s partnership with Make-A-Wish®, which has enabled children experiencing critical illnesses to meet and spend time with their favorite athletes.

Phoenix Innovate provides numerous direct and digital marketing solutions for cooperative partnerships, including our CenterPoint digital storefront platform. See our case studies to learn more about how these collaborations can result in transformative and sustainable solutions for your organization. To talk with someone on our team about tailored co-op marketing solutions for your organization, email us through our website or call us today.