Co-op Funds Are Going Unused
Advertisers are leaving $14 billion in 'free advertising' on the table.
New research from Netsertive and Borrell Associates shows that brands are missing out on billions in annual revenue due to inefficient and outdated co-op marketing programs. In fact, up to 40% of co-op marketing funds earmarked by brand managers for local advertising remain unused each year.
“The Changing Face of Co-Op Marketing” report includes insights from more than 150 brands and local businesses; it explores how digital marketing trends are altering the co-op landscape and the persistent barriers to adoption that brands and local businesses face.
“We were stunned to discover that advertisers are leaving $14 billion in ‘free advertising' on the table—about twice as much as three years ago,” Gordon Borrell, CEO, Borrell Associates, said in a press release. “This is because co-op programs are out of sync with local advertisers' changing needs, particularly in the digital realm. With a few adjustments and the help of new technologies to grease the skids, brands have a big opportunity to tweak these co-op programs in a way that transforms local business partners into an incredibly sophisticated and powerful sales force.”
Other findings include:
- Co-op is a dirty word among brands and local businesses. Though 53% of brands and 65% of local businesses participated in co-op marketing programs last year, both boast dissatisfaction and constant challenges. Half of brands cite a lack of digital marketing knowledge among local businesses as the biggest barrier to co-op marketing success, while local businesses cite too much paperwork (38%), too many rules (38%), and a lack of information (31%) as their biggest challenges.
- Local businesses are leading digital marketing spend locally. When it comes to local marketing spend, a majority (61%) of local businesses prioritize digital advertising over newspaper (56%), direct mail (53%), radio (45%), and cable TV (35%). Brands, on the other hand, still favor traditional mediums—newspaper (85%), radio (71%), and direct mail (71%)—over digital advertising (69%).
- Search, display, and email marketing are still the most impactful local marketing mediums. Despite the plethora of digital marketing innovation, brands and local businesses still rely on search (62%), display (67%), and email marketing (46%) to drive leads and sales locally.
- Brands and local businesses aren't prioritizing mobile marketing. Despite consumers' growing device dependency, 73% of brands and local businesses aren't leveraging co-op funds for their mobile marketing efforts. Those that remain focused primarily on mobile search and mobile-optimized websites. As a matter of fact, 61% of local businesses report having mobile-optimized websites.
- Adoption of digital video advertising is lagging locally. A large denomination (83%) of brands don't provide co-op funds to support partner use of digital video advertising. In fact, 46% say that fewer than 20% of their local partners currently use digital video advertising and 68% rate partner knowledge of the medium as novice or poor. Also, 22% of local businesses report never having used digital video advertising.
- Millennials are driving local sales opportunities—and brands are missing out. While 43% of local businesses reported an increase in sales to millennials in 2014, the majority (68%) of brands do not yet offer co-op support for millennial targeting at the local level.
To combat this growing trend, Brendan Morrissey, CEO and cofounder, Netsertive, said in a release that “[i]t's time to revitalize co-op marketing programs with a focus on digital marketing channels and to reinvent the broken relationship between brands and their local business partners.”