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10 Lessons Learned about Digital Co-op Advertising

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More and more brands are putting co-op advertising funds toward digital media. We’ve been watching this activity for the last few years and just last month I had a chance to discuss the changing landscape with local media executives at a Borrell Associates event in San Francisco.

LSA’s co-op database now shows that about 90% of brand co-op programs have added digital advertising funds. Some brands are being more aggressive than others in this shift to digital. For example, one major auto manufacturer’s co-op program now requires 50% of co-op funds be spent on digital.

We’ve picked up on a number of these digital trends and here are the top 10 lessons many local media organizations are learning in working with digital co-op advertising funds:

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1. The co-op landscape and value chain are shifting (above). If you want to be able to take advantage of the co-op advertising opportunity you will need to understand the new players, competitors and service providers that are chasing brand dollars. Local digital resellers are getting cut out and they need to have a strategy and extended co-op capabilities to address these changes.

2. Digital advertising has brought its focus on performance and ROI to co-op. Brands are starting to look at the big piles of money sitting in co-op programs and are seeing that they could be getting much better returns on that marketing and advertising investment.  These brands are more conscious than ever about getting a return, hence a shift to digital. The LSA’s database of co-op programs now shows that 90% of brand programs have added digital advertising into their programs.

3. ROI potential is driving more direct brand involvement and control in deploying and managing co-op spend. Brands are starting to exercise more direct control over the monies they are allocating to co-op. Some percentage of co-op budgets allocated on the behalf of local merchants may end up being spent by the brands directly or by the brands preferred providers, which introduces new competitors to local digital resellers.

4. With digital products comes more co-op program complexity. Each media has its own unique creative, fulfillment and proof of delivery and performance challenges that have to be understood and navigated. There’s more advertising options, more complex reimbursement rules, and the need to provide proof of performance. In addition, digital tools are requiring direct management of online claims submission. All of this points to more complexity for local digital media companies and resellers.

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5. As co-op shifts to digital, there is a wide discrepancy in digital advertising skills and capabilities among brands (above). There is growing divide within companies, both brands and media organizations. Due to limited digital proficiency and minimized co-op resource investment, companies have fewer people who understand co-op and how to navigate the new landscape to drive revenue.

6. Development of “creative assets” has become a bottleneck and is now more complex. While seemingly a minor challenge, creating brand-approved assets for multiple digital platforms can be a major issue for local media organizations. Producing locally, customized ad creative rapidly and in sufficient volume to support multiple digital ad campaigns is no simple task.

7. The most innovative local media companies are trying to leverage co-op for multi-media buys. These innovators are trying to leverage co-op funds for the purchase of large cross-media and multi-media ad buys. They are trying to demonstrate value across their core media asset of print, or broadcast or both, and bundle those with digital performance media and social products as well.

8. Co-op remains a huge, untapped source of local advertising funds for those who can adapt and move quickly. There are still big pools of money available in most verticals. Some verticals have shifted faster than others typically the most lucrative and earliest adopters of advertising like “Automotive.” But the vast majority of verticals and the brands that sell in them are still wide open.

9. Most local digital media sellers need help understanding, competing for and capturing the digital co-op opportunity. In spite of the big opportunity, we have found that co-op remains a bewildering and complex environment to operate in given the complex environment, rules and a growing number of service providers.  In addition, many find themselves without any, or very little in-house competence.

10. Digital co-op will drive a rethinking of the processes and service model required to capture brand co-op funds. Brands, service providers and advertising sellers are all looking for ways to reduce the number of touch points, limit number of approvals, streamline the process and reduce the cycle time.  The LSA hopes to lead that transformation.

If your local media organization is struggling to realize the potential with co-op advertising, check out what LSA has to offer. Click here to learn more.

3 Responses to “10 Lessons Learned about Digital Co-op Advertising”

  1. Clint Butler says:

    As I was going through this article I was brainstorming ideas on how to create our own Co-Op advertising opportunity for local businesses. Imagine pooling your money together with other businesses like yours to push your way into a higher spot on digital platforms that you may otherwise be priced out of because big players are driving up the costs.

    Seems like an idea worth pursuing.

    While the co-op discussed here is about branding, do you think that is something that small business may entertain?

  2. Greg Sterling says:

    Interesting idea. The money typically has rules attached to it, which might make fulfillment of your idea challenging. Would depend on specific implementation.

  3. Greg Sterling says:

    Yes. Co-op is a flexible tool that SMBs can use for numerous marketing purposes, depending on the program guidelines.

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