GREAT 97 IDEA: Take Advantage of Co-op Advertising

Do you ever wonder how local merchants get their name and address featured in the glossy magazine ads for a luxury car or watch? They do it through “co-op advertising,” designed to draw customers into your store.

Ad agency executives tell me companies like Harry Winston, the high-end jeweler “tag” many of their print ads with local retail store information to boost sales.

“It's a mutual collaboration. Each one is building the brand of the other,” said Erik Dochtermann, chief executive officer of KD&E, a Manhattan ad agency.

Dochtermann said retailers typically spend 3 to 10 percent of the total sales of an item on co-op advertising. (In most cases, money doesn't actually change hands. Small retailers get a discount on the merchandise when they participate in a co-op advertising program.) By working with a big manufacturer, small retailers not only get more bang for their marketing bucks, but garner exposure when ads appear in major publications or on billboards.

There is a catch: to qualify for inclusion in a co-op advertising program, retailers have to promise to stock enough of the product to be considered a major local sales outlet.

“They may need to take 5 to 30 pieces of a (watch or jewelry) collection,” explained Dochtermann. “Then, the vendor will contribute more co-op dollars. In other words, if my expensive ads are driving customers into your store, I expect you to stock enough of my products to meet the demand.”

For example, he said there are about 45 small retailers participating in the 2010 Harry Winston co-op program. The ads appear in regional editions, so local retailers benefit from the exposure.

If you sell clothes or video games, there are lots of co-op advertising programs designed to draw customers into your store. Dochtermann said the makers of the popular Grand Theft Auto video game buy in-store signage at the local level.

The more you do to promote the games, the more stock you'll receive, and the more money you'll make, Dochtermann explained.

“You can also sell space in your window and signage on your checkout counter. There is real estate available throughout your store,” said Dochtermann.

He said his clients can spend $1 million or more with small retailers across the country when the company is promoting a new video game.

So, if you want to sell a hot product, you are going to have to pay for the privilege. “You might have to build a kiosk, create a shop within a shop, provide extra training for your employees, or help pay for ads saying the product is now available.”

Check with your major vendors or suppliers to learn more about cooperative advertising programs. Even the biggest companies in the world look for ways to share advertising costs. For example, Intel promotes its processors in computer ads and on computers. My adorable Eee PC Netbook has an “Intel Atom” sticker attached.