Cooperative advertising is a cost-sharing arrangement between you and your suppliers for your advertising. The rules and policies for each cooperative advertising arrangement will vary for each supplier. However, one feature that is common in almost all cooperative advertising arrangements is that you must prominently feature the supplier's product or service in your advertisement. Cooperative advertising can significantly minimize your expenses— in particular, your advertising expense.

A typical cooperative advertising arrangement works like this. Each time you purchase the supplier's goods or services, you earn a certain number of cooperative advertising credits — generally the credits amount to 3 percent to 5 percent of the total purchase price. You can then use these credits to offset the cost of any advertising that meets the approval of that supplier. In some cases the supplier will only pay up to 50 percent of the total price of the advertising.

Reimbursement for the cooperative advertising can occur in one of two ways. First, you might have to pay the full amount of the advertising up front, and then provide the supplier with a copy of the ad in order to receive a reimbursement for their share of the advertising cost. Second, some suppliers may issue you credit memos equal to their share of the advertising cost and reduce the cost of any future purchases with the supplier. This will certainly entice you to continue to do business with this supplier!

Any supplier that has a cooperative advertising program will most likely have certain guidelines that you must follow in order to take advantage of the credits you've earned. These guidelines include such things as specifying the size of the ad, the location, and of course, making sure you exclusively feature their product or service (e.g., "Featuring XX Brand Computers"). Many suppliers will even provide you with copies of the print advertising or scripts for T.V. and radio advertising. Depending on the supplier, you may be required to use their advertising copy or script in order to qualify for a reimbursement. It's always good to have the supplier pre-approve the advertisement layout whenever possible.

 

Roth Office Supply is an authorized reseller of Quick Computers — a well-known company that manufactures computers. Quick Computers has a cooperative advertising program available to all its retailers like Roth Office Supply. Quick Computers has provided Roth Office Supply with the guidelines that must be followed in order for their Yellow Page advertising to qualify under the cooperative advertising program Roth Office Supply earns a 3.5 percent advertising credit on each purchase of computers it makes from Quick Computers throughout the year. The maximum credit that Roth Office Supply can earn is $2,500 during one year. Quick Computers will pay up to 50 percent of the cost of any single Yellow Page advertisement. During the past year, Roth Office Supply purchased $37,000 worth of computers from Quick Computers. Therefore, Roth Office Supply earned $1,295 in advertising credit ($37,000 x 3.5%). The cost of Roth Office Supply's Yellow Page advertisement for the next telephone directory was $885. Since Quick Computers will pay up to 50 percent of the total cost of the Yellow Page advertisement, Roth Office Supply will be reimbursed for $442.50 of the Yellow Page advertising cost ($885 x 50%). Roth Office Supply still has an additional $852.50 in advertising credit it can use to purchase other Yellow Page advertisements ($1,295 - $442.50).