Cooperative advertising is a joint promotional strategy in which a manufacturer agrees to share the advertisement expenses of its product with the distributor or a retailer. Two or more marketers producing complementary products or products used in different seasons or cycles may also agree to advertise each other’s products.
The manufacturers often allocate some budget each year for cooperating advertising.
The various methods of cooperative advertising are:
a. TV and radio advertisements.
b. Pamphlets or flyers.
e. Trade magazine.
f. Public booths.
g. Promotional gifts or corporate giveaways.
The various ways in which cooperative advertising is done are:
i) Direct mail Cooperative advertisement- It allows businesses to share the printing costs, bulk mailing costs and cost of other designs.
ii) Advertising cooperative advertisements- In this, the cooperatives buy a large newspaper or advertising space and divide the space equally amongst all the partners.
iii) Door hanger cooperative advertisements- In this, the businesses use both sides of the hanger to advertise their products. One side is used by the 1st company and the other side is used by the 2nd company.
iv) Online advertising cooperative advertisements - This type uses the internet to place cooperative ads.
Advantages: Small businesses benefit a lot from cooperative advertising. Businesses that might not be good at advertising are helped by the experienced ones. Also, some small brands receive good popularity on being advertised with the highly known brands.
Example: Some cartoon characters are not that known in India. When these characters are included in McDonald’s happy-price menu, their popularity increases and so does the sales of the company manufacturing them. Also, the movie featuring those characters gets good promotion.
Disadvantages: If a very large business is allowing a small brand to associate themselves with the bigger brand, the bigger brand expects some consistency in quality from the small businesses. This maintenance of quality may not be always possible for the smaller business. Also, the association comes with added terms and conditions which may hinder the liberty of the smaller business.
Example: When Dell sells its Laptop with a complimentary ‘Targus’ bag, it expects the brand ‘Targus’ to maintain the quality.
Also, there might be some hidden clauses in the agreements. So, it is good if a small company consults an attorney before entering into such contracts.
Let us take an example of a local retailer which has a good influence in a particular market or a geographical area. A big smartphone manufacturer is launching a flagship phone which will also be available in the same area where the retailer operates.
Both the manufacturer and retailer can combine the advertising expenses together for localized promotions in the area and offering special offers if the phone is bought from the retailer. This helps both retailer as well as manufacturer to cut their costs and customers also benefit as they get customized offers for their region.
Hence, this concludes the definition of Cooperative Advertising along with its overview.
This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.
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