The Co-operative Advertising Fiasco

Nancy J. Rabolt , Judy K. Miler

Business Case
Source: Bloomsbury Fashion Business Cases
DOI: 10.5040/9781474208796.0013
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Abstract

A retail buyer of moderately priced dresses for a New York specialty store wants to improve on last year’s sales numbers, but there is no hot item on the horizon like there was last year. He therefore hunts for promotional merchandise from a new vendor since his key resources do not have what is needed. The merchandise manager offers enough open-to-buy for 3,000 promotional dresses and funds for full-page ads in two newspapers. After the purchase was made the general merchandise manager was not able to fund the full cost of the ads, thus putting pressure on the buyer to get co-operative advertising dollars from the vendor. Instead the buyer and vendor decided to load the invoice, or increase the amount on the invoice such that those extra dollars would serve as a charge back to the vendor and pay for the ad, which subsequently increased the price of the merchandise. However, the retailer’s chief competitor had made a better deal with this vendor and the identical merchandise was shown at a lower price. The proper use of co-op advertising and the ethics of invoice loading are in question and dealing with the retail competition is imminent.


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