A Study of Vertical Cooperative Advertising

This thesis began as an exploration of the uses of and problems associated with vertical cooperative advertising. In the research, an attempt has been made to delineate those issues witch are potentially of interest to practicing managers as well as those issues which are of broader academic interest.

The second chapter outlined the nature of co-op, how it is used, managers' opinions of how it works, and some of the problems that managers encounter in using this tool. From the literature search, several generalizations emerged which have application to the on going problems faced by marketing executives. Generally, cooperative advertising is used by managers in a manner similar to other sales promotion tools. To a great extents it is a device which helps to trigger short-term sales results. Managers recognize that potential customers for infrequently purchased goods are sensitive to locally-sponsored promotions. Thus, co-op is used to stimulate fairly immediate consumer purchase by means of retailing advertising.

In addition, augmented co-op funds have often been found successful in developing incremental levels of trade buying and merchandising support.

Manufacturers can stimulate heavy retailer stocking levels, additional display considerations, and of course, a disproportionate amount of retail advertising by accelerated co-op allowance programs.

These types of objectives and the ensuring results make cooperative advertising appear similar to consumer and trade sales promotion. Immediate consumer response and accelerated trade buying levels are among the goals which characterize that set of marketing tools. Although co-op has the foregoing characteristics of sales promotion, it also has some characteristics of mass media advertising... being used for brand development, image projection, and general persuasion. Yet, the emphasis in how manufacturers seem to use cooperative advertising is on its role as a sales promotion device.

Manufacturers' managers often find themselves in canflict with retailers over the manner in which cooperative advertisements are executed. This often results from a lack of fit between the two cooperating firms' business objectives. Some of the frustration occurs because managers think that co-op should achieve the same range of communications objectives that their firms' magazine and television advertising does.

However, as we have seen here, retailer-sponsored advertising is best suited to trying to accomplish immediate results rather than the more long term goals often associated with natioanl advertising.

Co-op is a tool that is and should be used primarily for short term objectives such as sell-in and consumer purchasing.

The most important lesson from this apparent conflict is that managers in manufacturing organizations should thoroughly think through what it is that they want co-op to accomplish.

A realistic assessment of goals, in light of the firm's marketing stratery and competitive positions, might partially alleviate some of the frustration and conflicts inherently associated with co-op. Certain product/market conditions were confirmed as representing situations wherein co-op was a relatively significant part of the promotion mix. Product characteristics such as infrequent purchase, high ego-involvement, and low brand loyalty were among the salient dimentions which were thought to represent these situations. These were placed under a general categorization called "retailer dependent" marketing. It was posited that the common thread that ran through these characterizations was consumers' perceived risk in a buying situation. The more risk that was perceived by a consumer in a situation, the more a firm would stand to benefit from using cooperative advertising. the reason is that consumers seek more information in such a situation, and retailer's cooperative advertising fits both the need and the time of that need.

It was generally agreed that, from a manufacturer's view point, cooperative advertising is most effective when it is combined with an equally strong national advertising program. This need to develop an image via national advertising as a prerequisite for successful use of co-op was related by several executives to the hierarchy of communications effects. Cooperative advertising was seen as accomplishing the final "action" steps in that hierarchy.

The third chapter outlined source effects theory and advertisements containing two signatures. We are particularly interested in the source and the nature of its influence upon the perception of the message and the resultant attitude change and behavior.

The concept of source effects was researched in depth in a series of studies conducted at Yale University during the 1950's.

These studies have generally supported the hypothesis that highly credible sources are more persuasive. It was established that under most conditions, the more credible of two stores will exert a more persuasive influence in the consumer's decision process.

The experiment and analysis discussed there address the issues of which cue or set of cues... manufacturer's brand name or store name... is used by the consumer when making a purchase decision.

These two specific cues, brand and store, are at the heart of the co-op effectiveness assessment problem. Managers of manufacturing firms that use cooperative advertising do so because they believe that consumers look to retailers for information when making a purchase decision.

Similarly, retailers are persuased to use manufacturers' names in their advertising because of the supposed selling power of such brands.

In odder to understand the effectiveness of cooperative advertising, managers need to know how the consumer uses the two names presented in the advertising.

The conflict between retailers and manufacturers comes down to the issue of which of the two cues is most beneficial, or most salient, to the consumer during the time of final purchase decision.

The pilot-sized experiment conducted as part of this thesis addresses this issue, and has resulted in some valuable findings.

The first part of the field experiment verified that consumers do look to their preferred stores as a source of persuasive information.

The management implication of this is that the respondent's information search behavior is, in fact, very stored-oriented.

This finding reinforces some of what has been said before about the management of cooperative advertising. That is despite a consumer's brand loyalty and positive prior experience with a brand, the specific store that advertises a branded product does make a difference to the consumer. Cooperative advertising programs, resulting in store related communications, therefore, do serve a beneficial purpose.

Manufacturers can expect to derive some marketing value for their brand from such cooperatively funded advertising. This finding establishes the general efficency of cooperative advertising.