Brand Frustration: Many Local Businesses Don't Utilize Co-op Dollars
- by Laurie Sullivan @lauriesullivan, September 27, 2012
National brands have either begun to reimburse 100% of co-op dollars for digital ads or make more "free money" available for the taking -- but many local stores, independent dealers and franchisees don't make the request. If they do, few effectively allocate the funds, and even fewer invest in digital media, according to Rick Ducey, managing director at analyst firm BIA/Kelsey.
Ducey said research with Balihoo -- which provides local marketing automation technology and strategic co-op planning -- found that local stores and dealers that request funds may spend it on newspaper and radio ads rather than digital.
Ducey insists that co-op spending can help local retailers develop more integrated campaigns, but they leave about half of the dollars on the table, despite increasing competition. Those that do spend it online might never fill out reimbursement forms. For some retailers, Ducey said the rules and reimbursement paperwork is a disincentive. Busy store owners often can't take time to understand co-op marketing to make appropriate decisions.
Companies with only $2,000 to spend may want to invest it online -- such as in search marketing -- because they will get better engagement results and return on investment, Ducey said. A recent report by Forrester Research shows how email and search drive repeat and new customers.
BIA/Kelsey forecasts digital spending to rise to about 25% of the local ad spending pie. Social and mobile are big growth components, but search is still strong. Mobile search is one of the biggest growth areas. Ducey said local businesses need to include search in their ad budgets to keep competitive and have an integrated strategy that leverages strengths of the entire purchase funnel.
In the automobile dealers and manufacturers category, BIA/Kelsey forecasts that marketers will spend about 20% more this year. "If you’re an auto dealer and not keeping pace, you may be more susceptible to more effective ad spending by your competition," Ducey said.
Great article! There are definitely some challenges that come with co-op in the digital space, but it’s also a big opportunity. The IAB and the LSA explored co-op in a whitepaper released earlier this month entitled “Co-Op Advertising: Digital’s Lost Opportunity?” http://www.iab.net/coopadvertising . I think education on digital for local business as well as education on co-op for digital sales people is one thing that will help tap into more of those dollars.
The article also mentions currently local stores are spending co-op money on newspaper and radio. With so much audio being listened to on digital devices that seems like a good starting point for local stores to branch into digital.
Media sales reps should be targeted as well as business owners. Good reps will package co-op programs, generate the proofs of performance and complete the paperwork for the business owner. In my experience, co-op can be difficult for a small business owner to coordinate, but local sales reps who are on their game can increase their annual billing by 25% using co-op dollars. These programs need to be promoted to local media reps as much, or more, than the business owners. Don't just sell digital, sell an advertising program that includes digital and incorporate all available co-op dollars into it.
Phil's absolutely right. We had a local ad sales client (who uses our platform) who thought of jumping ship from his sales org and just using our self-serve ad builder to pro-actively put together finished digital campaigns for local advertisers using their own co-op dollars. He could just sit in the middle and keep a margin for himself and everyone would win. It just boiled down to being pro-active, pouncing on co-op dollar opportunities, and doing a bit of up-front work to facilitate the whole thing. But as Paula said, there are also bottlenecks within the brands that are offering co-op dollars. We have another client who experiences this from the brand side of things, where coordinating co-op participants is like herding cats.
Myles, I would rather herd cats. They respond to food. Smaller retailers respond to very little and don't/won't/can't provide the info for the salespeople to fill out the papers. Your example may want to make sure he still has oars because that ship has too many captains to float. It takes too much time to make too little money. Been all through the mill and prefer to earn income without being dependent upon one person to screw up a sale. My dead file (Out Of Business) was bigger than most others live file. Remember, when the money is not used for ads, the dealers can use it for entertainment or can cash out depending upon each different manufacturer/dealer so incentive along with too little money leaves much to be desired.
Paula, thanks for the extra color! LOL! Seriously, though, great info.