Report: Billions In Local “Co-Op Advertising” Funds Left Unspent Annually

Ask digital agencies and marketers about “co-op advertising“, and many of them have only a vague idea of what that is. At the most basic level, co-op advertising is a brand or manufacturer sharing (or a subsidy) of local retailer, vendor or dealer advertising costs. This represents a pool of money in the US that some have estimated to be in excess of $50 billion annually  — much of which remains untapped at the end of every year.

Historically, this money has been used on traditional media ads, though digital utilization of these funds is growing as a percentage of the overall total. That’s according to a new report (registration required) by Borrell Associates (sponsored by Netsertive).

Tapping into these funds can be challenging and can require careful and sustained effort (there are brand compliance issues). Those “bureaucratic” obstacles are one reason why much of the money goes unspent, on top of a lack of awareness. Indeed, brand/manufacturer rules, paperwork and other barriers stand in the way of many local marketers accessing these funds (or manufacturer credits).

While sales organizations can help in this process and minimize some of the complexity, the following survey responses from local advertisers featured in the report illustrate some of the challenges to co-op participation:

The Borrell report estimates that only 15 percent of local advertisers are currently participating in co-op advertising programs. Yet those local advertisers that are able to make it through the maze of requirements are clearly reaping benefits. The report also points out that advertisers utilizing co-op funds have much higher marketing budgets than those that do not.

This is partly a function of more sophisticated advertisers with larger budgets taking advantage of these programs. But it also reflects participating advertisers’ ability to boost their budgets accordingly.

Agencies and marketers that work with local advertisers can and should try to tap into these funds. It’s a “win” for all involved — the agency/sales channel, the brand and the individual advertiser.

The IAB also generated a report a couple of years ago that offers some foundational discussion of co-op and supports many of the arguments advanced in the Borrell report. The LSA (the Local Search Association, for which I work) also has resources for marketers and sales organizations seeking to learn more.

About The Author

Greg Sterling

Greg Sterling is a Contributing Editor at Search Engine Land. He writes a personal blog, Screenwerk, about connecting the dots between digital media and real-world consumer behavior. He is also VP of Strategy and Insights for the Local Search Association. Follow him on Twitter or find him at Google+.