Co-promotion is a marketing practice that allows two or more companies to combine their sales force in order to promote a product under the same brand name and price with a single marketing strategy. It is considered as one of the two major forms of joint marketing (Kalb 1988). Co-marketing is the other form and these terms are often confused. It is made through an agreement (the co-promotion agreement) which requires a lot of collaboration between the sales and marketing organisations of both companies. One of the partners usually has a licence to exploit the product and the other partner is the originator or licensor. It helps the less developed areas of a company to be covered by the partner company's strengths and therefore to expand the share of voice in the marketplace for a product. Through co-promotion, a collaborative strategy, the consumer attraction is increased. It is a way co-exploiting products.
Characteristics
Many collaborative marketing strategies are often confused. The elements that differentiate co-promotion from other marketing practices are the following: It is on a national basis and has a better impact on a short period. It is considered as a non-competitive strategy. It is built under one brand and the image is applied on both companies (1 brand, but 2 sales forces). It has an extensive coordination. Requirement of co-promotion is usually made by smaller companies. Co-promotion is also known for offering high potential payment, it is the most attractive agreement type for both in and out-licensers compared to other agreements such as co-marketing. Co-promotion agreements also tend to be much more flexible because partners can decide what type of payments they prefer. For example, partners can choose either profit sharing without royalty payments or higher royalties on sales.
The agreement
How it works
Companies seeking a partner identify their areas of strengths and weaknesses and agree to share promotional efforts. The owner of the product usually manufactures it and uses the other company's trademark. The profit on the sales resulting from shared promotional effort is divided according to the amount of effort made by the partners.
Types of agreement
Standalone co-promotion deal: Case where two or more parties combines sales capabilities for promotion (tend to occur when the product is already marketed). This type of deal was applied for diphenhydramine (Allergan) by MAP Pharmaceuticals and dihydroergotamine (Levadex) in January 2011. Multi-component deal: Case where two or more parties anticipate the possibility of co-promoting as a consequence of R&D effort. The licensor will have an option to co-promote the product in defined territories once the product is launched (occurs at any time of development). Orexigen and Takeda Pharma collaborated to promote naltrexone/bupropion ((Contrave)) under this form of deal. This type of deal often cause problems because of issues such as inability of implementation caused by the pricing or strategies that might change.