Digital Media Advertising Rules; Earmarked Co-Op Programs Unused

According to a new white paper by Borrell Associates in collaboration with Netsertive, online surveys of brand managers and local business owners, along with telephone interviews and an analysis of the latest advertising data, paint a clear picture of the new face of co-op advertising. The analysis uncovers key trends and delivers valuable insights to brand managers attempting to spur front-line sales via co-op programs.

Co-op advertising programs in North America will total $36 billion this year, says the report, potentially affecting about 12% of all ad spending. As brand managers attempt to spur sales in an increasingly complex marketing environment, digital programs have begun to take center stage.

For the purposes of this report, a brand manager is defined as a marketing professional in a major product company or manufacturer who is responsible in whole or in part for partner marketing with co-op at the local market level.

A typical brand manager participant reserves up to $2 million for co-op funding, on average, while a typical local advertiser participant uses an average of four co-op programs, spends co-op dollars mostly on (in order) digital, newspapers, direct mail, radio, and receives up to $25,000 annually for co-op programs.

Brand managers have been plowing more dollars into co-op programs, growing the coffers 20% annually over the past three years, says the report, but that money is merely earmarked by brand managers wanting to spur sales at the retail level. At least 40% of it, more than $14 billion, is left unused, roughly twice the amount unused just three years ago.

While the funding is swelling, the advertisers are tuning out: In 2012, a Borrell Associates survey of 1,354 local advertisers showed that 30% had participated in a co-op program at one time, and that 18.9% were currently participating in one. Three years later, the survey of 3,741 local advertisers showed that only 15.5% were currently participating.

With so many local advertisers focused on maintaining a presence and gaining leads from mobile and desktop searches, it’s easy to understand how long-established co-op programs that rely heavily on traditional media channels might have become out of sync, suggests the study analysis. The shift to digital channels has made access to, and control of, co-op more challenging, while at the same time presenting an opportunity for brands and local retail partners to re-synchronize co-op programs.

There’s a larger trend, and a larger opportunity, says the report… advertising is in decline, while spending on overall marketing has mushroomed. Since 2007, when local advertisers for the first time began spending more money on marketing services and promotions than they did on classic forms of advertising, they had begun putting money into building out their own company websites.

Since then, businesses last year spent 72% more on marketing-related services and promotions than they had spent 10 years earlier. Meanwhile, the annual expenditure on local advertising in 2014 was 22% less than it was a decade ago.

Advertising Yields to Promotions & Marketing ($ in Billions)


































Source: Borrell Associates, September 2015

The promotions and marketing expenditures include discounts, rebates, contests, promotional flyers, refrigerator magnets, a sign for the front window, search engine optimization (a technical task), building a website, managing email communications with customers, crafting and managing social media pages, producing a YouTube video, and even website hosting.

More and more of it is spent on digital projects, as local business owners have their own direct-to-consumer medium at their disposal, they’re putting more money into managing it, and scaling back on traditional forms of advertising. Print and broadcast media are losing market share to digital media as overall advertising grows at low single digits, but digital media grows at double digits. Based on ongoing surveys of local advertisers, the report estimates that digital advertising has grown between 35% and 42% annually since 2013.

Of the brand managers surveyed, 69% manage up to $2 million in co-op funding per year and 16% manage more than $5 million. When asked how much these programs generate in sales, 56% selected “prefer not to answer,” the equivalent of “don’t know” (since that wasn’t offered as an option).

Brand managers brush aside the notion that dysfunctional vendor marketing, red tape, and time are very big problems, but a lack of understanding of digital marketing is overwhelmingly viewed as a core challenge. More brand managers identified this as an obstacle than any other choice offered. “Don’t know about” programs and “don’t see co-op programs as valuable” also registered relatively high.

Obstacles to Participation in Co-Op, Say Brand Managers


% of Respondents

Partners don’t understand digital marketing


Partners don’t know about our co-op programs


Partners don’t see co-op programs as valuable


Partners don’t follow branding guidelines


Partners need too much support


Managing distribution of funds too time intensive


Vendor marketing efforts fail


Partners don’t have websites


Source: Borrell Associates, Julyr 2015

Despite the high growth and obvious interest in digital media, co-op programs still heavily favor traditional media. The survey showed that 82% of brand managers said their offerings include newspapers and 71% said they included direct mail and radio. Digital co-op, meanwhile, is offered by 69%. Specific categories that seem to interest local advertisers so much – social media marketing and digital video of their businesses and product offerings – ranked lower than yellow pages in terms of what brand managers offer.

Media Offered in Co-Op Programs

Media Communications

% of Respondents



Direct mail




Digital marketing




Out of home


Broadcast TV


Cable TV


Email marketing


Directory/Yellow pages


Digital video advertising


Social media marketing


Source: Borrell Associates, July 2015

In the new marketing environment digital is front and center, concludes the report. Local businesses remain focused on digital media, especially search, as a primary driver of new customers. A massive survey of 7,228 local advertisers, conducted earlier this year, notes the report, placed digital media as the leading source of new business, just behind customer referrals and well ahead of all other media.

If brand managers want to spur use of co-op funding, suggests the report:

  • Program qualifications need to be streamlined. “Too much paperwork” and “too many rules” continue to be the chief obstacles
  • Search advertising needs to be a far bigger part of the digital side of co-op. Local businesses are migrating away from buying basic website banners and want their messages to be closer to the consumer needs
  • The co-op programs should be expanded from “advertising” to encompass “marketing and promotions” initiatives.
  • Incentives for mobile and video initiatives should be vastly increased.
  • Methods of mitigating the ad-switching risk need to be instituted. Local businesses are unsure of how to do that. A program that allows advertisers to monitor the effects of their placement in real-time and automate some of the buying decisions may be a big hit within co-op programs.

For additional information from Netsertive, please visit here, or access the complete report here


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