Tapping into the Co-Op Opportunity

Co-Op (cooperative) Advertising is a tremendous opportunity for both sides of the supply chain to share in success; however, industry stats show it’s also a tremendously underutilized opportunity for digital advertisers. So, let’s this breakdown this opportunity to help demystify the components while sharing some practical use cases that Kenshoo advertisers have implemented.

First, what is co-op advertising and what does it mean to advertisers?

In a nutshell, co-op advertising is a mutually beneficial partnership between manufacturers and retailers (or franchisor and franchisee) that help both sides reach their target market. In other words, manufacturers contribute marketing budgets to help their retail channels sell their stuff. It can be a highly effective, win-win all the way around.

However, according to BIA/Kelsey this is a significantly underutilized opportunity for digital advertisers where only 13% of budgets go to online spend. What’s worse is that about 50% of co-op budgets go completely unspent! Perhaps this is due to red-tape, ineffective execution, or just lack of know-how to get it off the ground. I can’t help you navigate the internal tape, but I can share how Skai advertisers have set up and executed some pretty cool SEM co-op programs.

Now before you go proposing the next big co-op to your boss, there are a few high-level considerations to think through:

Goals – What is the primary purpose for the budgets? There are three typical objectives you could have: direct response, branding/awareness, or conquesting. Direct response helps drive immediate sales; awareness initiatives help educate new and/or undecided customers; conquesting is a more aggressive approach to take your competition’s customers.  Regardless of the goal, stay true to it and design your strategies to support them.

Program Management – Who orchestrates the setup, manages the delivery, and coordinates reporting? If run by the manufacturer, they get hands on control and direct reporting accessibility, but are rarely able to drive traffic directly to the retailer where consumers can make the purchase.  If managed by the retailer, they can cut out a few steps in the conversion process but need to work hand-in-hand with the manufacturer on budget allocation, strategies, and measurement.

Budget Source – Where does the budget come from and what’s in it for them? Many times the manufacturer’s Product Manager wants to push a specific product, while a CMO may have interest in more broad initiatives. Either way, it leads directly to the next question…

Measurement – What level of reporting and tracking is desired by the manufacturer, and how much is the retailer willing or able to share? Technical abilities and internal motivation can vary wildly so each scenario may be unique.

Then, more tactically, there are the particulars of the program to take into account, specifically the targeting and actual customer experience.

Targeting Strategies – Where in the search funnel should you target?

• Upper funnel, category terms are used by consumers early in their search to evaluate options and can be a great way to reach unfamiliar or undecided consumers. However, since these customers are just starting their research, don’t expect these keywords to drive the same ROI as lower funnel terms.
• Targeting product-specific keywords, helps connect with consumers who are already somewhat familiar with your product and can be effective way to seal the deal.  However, if the searcher is already familiar with the offering, the value to manufacturers might not be as great.
• Branded manufacturer terms is another highly effective way to convert searchers into sales. However, just like product specific terms, the consumer is already familiar with the manufacturer which may bring little incremental value to the manufacturer.

Consumer Experience – What experience do you want to provide the searcher to make them your customer?

• The destination page is where the searcher is delivered. Driving traffic directly to the retailer page to purchase can often maximize conversion rates. However, since channels require the ad display URL to match the destination page, this may lead to the question of who manages ‒- manufacturer or retailer.  On the other hand, driving to the manufacturer informational page adds a step in the conversion process, but can be much easier to get off the ground without same level of partner dependency.
• The ad creative encourages the searcher to click and describes what they should expect when arriving to the destination. It’s common for co-op programs to feature the manufacturer’s product/service by name in the ad along with key value propositions or promotional offers.
• The Display URL shows who is sponsoring the ad and the domain where the clicker will be delivered. As mentioned above, most channels have policies that require the display and destination URLs align.

For a co-op initiative to get off the ground, it’s important to factor in all these consideration. With a grasp on the individual components, let’s put it all together with a few real-world practical applications going from relatively simple, to more sophisticated.

1. In an effort to promote brand awareness, “SNAZZY Phone Co” launched a paid search program that targeted upper-funnel, general phone category keywords and drove traffic to a “snazzyphoneco.com” page that featured its entire product line. On the landing page, SNAZZY linked out to retail partners where the searcher could follow through to purchase. The advanced bidding algorithm in Skai Portfolio Optimizer was used to maximize outbound partners referrals, and reduce overall cost per referral with the set co-op budget allocation.

2. To complement its own online initiatives and drive incremental partner sales “STELLAR Computer Company” gave Retailer.com budgets to launch a new SEM campaign to target upper-funnel, general computer category keywords which Retailer.com would otherwise not have bid on due to poor ROI performance. A dedicated Skai profile was set up for this initiative to clearly distinguish STELLAR budgets and Skai reports-only access was granted to STELLAR stakeholders to monitor KPIs without direct access to make changes or see other Retailer.com SEM activity. This program was such a success that Skai’s Halogen forecasting capability was used for scenario planning of additional co-op budgets.

3. To help support phone reservations for “BEST Hair Cuts” chain franchisees, the corporate office launched individually geo-targeted SEM campaigns for each locale. Using Skai Call Conversion Optimization (CCO) to tie the call data back to the online searches that lead to the call, BEST was able to fund the campaigns centrally on behalf of their franchisees while reporting back to the partners the amount of calls generated and total phone bookings.

4. “QUALITY Coffee Makers” wanted to help retail partners sell last years model, and was willing to provide an offer-based incentive to make room for a new line coming out. To help move product, the manufacturer launched a new SEM campaign featuring a 10% cash back rebate coupon that customers could print online and redeem in-store. Leveraging Skai’s integration with Revtrax, the manufacturer was able to tie back the in-store sales to the online click path, keyword, and ad for optimization and reporting purposes.

There are countless other scenarios and strategies for activating co-op budgets, but hopefully these considerations and strategies will get you thinking of the possibilities for your own organization. To discuss opportunities around co-op advertising and more, contact us today.