Dynamic cooperative advertising in a channel

The paper studies a two-member channel in which a manufacturer and an exclusive retailer can make advertising expenditures that have both short and long term impacts on the retailer's sales. The manufacturer can also support both retailer's advertising efforts through a cooperative advertising program. Four scenarios are considered. In the first, which acts as a benchmark, the manufacturer provides no support to the retailer's advertising. In the second, the manufacturer supports both types of retailer advertising. In the two remaining cases, the manufacturer supports only one of the two types of retailer advertising efforts. In all cases we assume that the manufacturer wishes to coordinate the channel so as to obtain maximal profits for himself. Our analysis of these options shows that supporting both types of retailer advertising provides more profit to both channel members than any of the two cases of partial support. The latter is, however, better than no support. We derive managerial implications from the theoretical results.