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and Borrell Associates shows that brands are missing out on billions in annual revenue due to inefficient and outdated co-op marketing programs.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.”
