It's hard to imagine traditional retail without an advertising allowance, and now it's gaining importance in online advertising as well: Currently, there are two formats – Facebook’s Collaborative Ads and Google’s Shopping Campaigns with Partners – that bring the popular marketing concept into the digital world. In this blog post, you'll learn what advertising allowance in performance marketing actually is, how the two aforementioned formats work, and what benefits you'll gain from implementing them.
Reaching the target group where they are – this marketing mantra naturally also applies to the advertising allowance. Since the user journey is shifting more and more to digital, it only makes sense to offer a digital implementation for this concept as well. But first things first:
According to The Business Professor, an advertising allowance is a financial contribution from the industry to retail companies, originally used with the aim of activating retailers to promote certain products. In traditional retailing, for example, you can think of it like this: Products are prominently displayed at the point of sale; customers receive a voucher when they buy a product, which they redeem the next time they buy something of the same brand; a 2-for-1 promotion increases the appeal of an offer.
Example of advertising allowance in traditional retail: Products are placed prominently. Source: unsplash.com
And what does advertising allowance mean in digital marketing?
Both Facebook and Google have addressed the issue, and each developed a format that enables simple, transparent collaboration between the manufacturer of a product and the online retailer. In this way, companies can automate and directly implement advertising allowance via the respective platforms. This means that budgets and reports do not have to be passed back and forth between the manufacturer and the retailer; instead, both players can access the respective platform individually and directly view and evaluate all relevant information, such as budgets or targets.
This is how advertising allowance works via the Google Shopping Campaign with Partners format. Source: own illustration
Google Ads: Shopping Campaigns with Partners (SCwP) 2.0
After an initial run and first tests, Google Ads has revised the format and now offers Shopping Campaigns with Partners (SCwP) 2.0, a beta version that allows manufacturers to actively support the retailer by co-funding the click prices in order to increase the visibility of the products and thus the traffic. This should ultimately lead to increased sales.
To make this possible, the manufacturer must upload its products in the so-called Manufacturer Center and create an SCwP campaign in Google Ads. Linking this to the retailer’s campaign makes it possible to promote selected products or all products of the brand with combined power – and combined financial participation. By combining their budgets, both parties can achieve more than if they were to run separate campaigns and possibly compete with each other's ads. Co-funding gives manufacturers the opportunity to stand out in a pool of brands offered by the retailer. Thanks to the specially designed format (SCwP), manufacturers and retailers can still each define their own goals and independently view performance at any time. The retailer’s website handles traffic and purchase processing. In return, the manufacturer receives insight into data such as performance and sales figures.
Leverage the full potential of partnerships to reach more shoppers and drive conversions with Facebook Collaborative Ads. Source: own illustration
Facebook: Collaborative Ads
Facebook's Collaborative Ads are particularly interesting for manufacturers who do not have their own online store. With this format, they have the option of independently setting up dynamic ads in an independent ad account and linking them to the product feed of a retailer of their choice. In this way, the manufacturer does not have to manage his own product feed, but can still advertise his products in a targeted manner and check their performance. The retailer’s website handles traffic and purchase processing. Similar to Shopping Campaigns with Partners, the manufacturer gets more insights on campaign performance and sales figures.
Benefits of Shopping Campaigns with Partners and Collaborative Ads
- Reduce operational friction because both the brand and the retailer have access to the campaign performance, where they can store goals and obtain automated reports. Without Google’s and Facebook's formats, these tasks would have to be performed and shared manually, which is significantly more inefficient.
- Awareness: Maximize online presence with jointly funded campaigns to improve traffic, engagement, and clickshare.
- Drive Sales: Together, the brand and the retailer can reach more shoppers to increase traffic and sales.
- Incremental Demand (applies to SCwP only on Google Ads): Bids and budgets can be increased selectively to meet incremental demand.
Other possibilities for advertising allowance in online marketing?
In addition to the formats described for the two ad platforms, Google and Facebook, there are of course various other options for advertising allowance in the digital sector:
- Advertising space on the website,
- Prioritized positioning on category pages, for example,
- In the newsletter, or
- More traditional search campaigns.
In this context, you may well come across the term retail media. Retail media is quite common in the marketing industry, but watch out! Retail media does not only mean the digital version of advertising allowance, but also the basic possibility to advertise within webshops or digital marketplaces like Amazon and Co.
So, where do we go from here?
For manufacturers, the first thing we recommend is to find the right digital retail partner(s). Everything else depends on the setup and the capabilities of the retailer. Our e-commerce team will be happy to support you in selecting a partner and plan the next steps with you.
For retailers, we recommend contacting brands that are interested in digital advertising allowance. Together, we look for suitable formats and define the next steps. Retailers must be approved for the two format variants, Shopping Campaigns with Partners and Collaborative Ads. We are happy to support you with our direct partner agency contacts to Google and Facebook.