Co-op advertising

Co-op advertising, short for cooperative advertising, is an arrangement in which a manufacturer pays part or all of a retailer's advertising costs for its products, usually from a fund tied to the retailer's purchases.

Co-op funds are an old form of trade marketing. A brand sets aside an allowance, often a share of the retailer's purchases or an amount per unit, and repays the retailer for ads that feature the brand. The ads must follow the brand's rules, and the retailer must send proof that they ran.

In the US the practice falls under the Robinson-Patman Act. The FTC's Guides for Advertising Allowances and Other Merchandising Payments and Services list cooperative advertising among the promotional services covered by sections 2(d) and 2(e) of the Act (16 CFR 240.7, eCFR).

The Guides say such allowances should be offered to all competing customers on proportionally equal terms. One method they give is a rate per unit bought, such as up to 12 cents a case for newspaper or internet advertising or handbills (16 CFR 240.9). Customers that cannot use the main offer, such as online retailers that do not buy newspaper space, should get a usable alternative (16 CFR 240.10).

Example: A coffee brand gives a regional grocer a co-op allowance worth 2% of its purchases. The grocer spends it on flyer slots and sponsored listings in its app, sends proof of placement, and the brand repays the cost up to the fund balance. The brand offers the same terms to the grocer's competitors.

Related terms: trade spend, shopper marketing, retail media network, commerce media, sponsored products.

Authoritative source: FTC, Guides for Advertising Allowances and Other Merchandising Payments and Services, 16 CFR Part 240 (revised 29 September 2014, 79 FR 58252), eCFR.