Here a manufacturer offers retailers an advertising program for the later to run. The program may include suggested advertising format, materials to be used to create actual advertisements, and money to pay a portion of the cost. Certain merchandise quantity is also suggested for the retailer to stock and perhaps display. There are 3 types of co-op advertising:
- Vertical: When the upstream manufacturer or service provider pays for a downstream retailers ad.
- Horizontal: When local dealers in a geographic area pool money for advertising.
- Ingredient producer co-op: When the producer of an ingredient pays part of an ad run by the user product.
The intention of this type of communication is to stimulate short-term sales. The advertising is specific to the product, the place as to which it can be purchased and the price. To maintain the brand image and to reinforce the company’s leverage with the retailers are important long-term considerations. The need should also be to expand the distribution coverage by allowing allowances to the retailers.