A recent interaction with an apparel manufacturer reinforced a disturbing trend with some national brand marketing managers who see their channel as an enemy to their efforts. Sadly, this person has it all wrong. The problem isn’t the channel, but his management of the co-op advertising program.

The conversation, though not verbatim, went something like this: 

Me: "So do you offset any part of the marketing cost for your stores? Do you do co-op advertising?"

Prospect: "Well, we did until last year when we cancelled our co-op program."

Me: "Why the change?"

Prospect: "Well, we got tired of spending a bunch of money so the store owners could run our brand on sale 52 weeks a year."
 
Me: "What do you mean by that?"

Prospect: "Well, we were paying co-op dollars for ads that were... well... Crap! So, we've cancelled our co-op program, and we're now taking that money and investing it in building our brand up nationally instead of tearing it down. That's a much better use of our money. "

Me: "Tell me more."

Prospect: "Well, now we can control the messaging. We could never satisfy the store owners with our creative, so they went off and did whatever they wanted. Some of it wasn't very good. Now, at least we're not paying for it." 

That got me thinking. Are independent store owners a friend or foe of the brand? Sadly, this is an example of a fundamentally flawed co-op advertising program that allowed these three problems to ruin the engagement:

1. Lack of common vision in shared success
2. Lack of creative quality control over ads that his co-op dollars were buying.
3. No alignment between the brand and store owner’s actions regarding promotions.

Lack of Common Vision in Shared Success

If a business owner has invested money with a brand to sell its products, , you'd think that he or she would be a friend of the BRAND, right? Am I crazy? I mean, those guys have hitched their wagon to the brand's star. Who could have more of an investment in a brand's success than an independent store owner?

Similarly, the brand has invested in the success of the business owner. The products are sold locally, not nationally. How then, could the brand look at removing funding for local advertising as a good thing? I can bet that the store owners aren't happy. Will he or she begin to sell a competitor’s product? Will the result of national branding really result in more products sold? In my experience, fighting the channel only causes problems getting the product into consumer’s hands. The store owner often refocuses on a competitive brand and the national brand is typically the biggest loser.

Lack of Creative Quality Control

After a bit more digging, it turns out that the poor quality advertising was a result of the store owner’s inability to easily customize the brand's creative to meet their local needs. With limited editing control, the store owner opted--at his own expense--to build his own creative ad from scratch, which ironically, the national brand still paid a portion of. In the end, the store owner needs a solid ad builder to customize the ad within the brand’s accepted guidelines.

In addition, the brand's processes to review and approve creative ads before they contribute co-op dollars was flawed. As a result, they felt that the subsidy was working against the brand; not for it. Brands, stop paying through the nose to tear down your own brand. Solutions for both problems are available.

No Alignment between the Brand and Store Owner’s Actions Regarding Promotions

While tools solve most co-op advertising problems, there must be important alignment between brands and channel partners. There should be business logic built into the pricing and promotional liberties given to resellers so that they build the brand rather than tear it down. I’ve seen plenty of these arrangements and I can consult with any brand on their co-op arrangements. The one piece of advice I offer is to understand motivation and incentives. Game theory explains this. Co-op programs should be written understanding that each party will do what is best for them regardless of what may be optimal for both if they colluded. Don’t fight that economic reality. Embrace it and your co-op advertising will be successful.

When uncontrolled, co-op advertising programs can create confusion and tension causing the Global Marketing Managers and channel resellers to wonder who is friend and who is foe.

Don’t let this happen to you. Co-op advertising programs work with the right tools like those provided by Balihoo's Local Marketing Automation solutions.