This article has been authored by Mohamed Saber, International Brand Manager, Media, dentsu.
In the world of digital marketing, cooperative advertising is probably one of the most untapped growth opportunities.
How did we get there? How is it going? Where do we go from here? Let’s find out!
The Missed Opportunity of Co-op Advertising
Since the 19th century, retailers and brands have understood the main benefits of cooperative advertising: sharing advertising costs and driving additional sales.
Brands get to boost their exposure at a lower cost. Retailers get to associate themselves with big brand names, and smaller retailers get this additional advertising budget that they might not otherwise be able to afford.
Although this sounds like a win-win situation, brands still had to cede a percentage of their revenue to retailers to access cooperative marketing and advertising opportunities. This budget sharing came with little transparency and was difficult to track and manage.
Surprisingly, the situation has only slightly changed with the online revolution, despite the possibility for brands to better track, manage, and measure their advertising dollars than ever before.
Most of the co-op budget is still estimated to be spent on offline channels, leaving a huge untapped opportunity for online growth.
New Solutions Involving Cooperative Digital Marketing
The key obstacles to cooperative digital marketing growth were a lack of automation, reporting capabilities, and transparency. Although new solutions were introduced to overcome these challenges, brands and retailers were slow to adapt.
This situation opened the door for ad tech giants to capitalize on this opportunity.
Amazon was the first to offer solutions empowering brands to control their cooperative budget by using Amazon’s ad platform to manage bids on a granular level. Other tech giants introduced co-op ad solutions, such as Facebook through collaborative ads and Google with co-funded ads, enabling advertisers to have more transparency on their digital ad dollars - and consequently encouraging advertisers to direct more co-op investment towards their platforms.
Retailers also took notice and started to offer their own solutions. For example, Douglas, a leading premium beauty platform in Europe, offers a great range of marketing solutions that empowers brands to take control of their co-op budget and have more transparency on cost and measurement. Similar solutions are now offered by Sephora, Lazada, and many others.
Although these solutions have met success and led to increased investments, they are now challenged by a new context around data privacy and protection.
For instance, the Apple iOS 14.5 update has massively impacted the capabilities of these solutions which heavily depend on user tracking both to deliver a personalised ad experience and provide visibility on ad effectiveness.
As Google announced the end of support of third-party cookies in Chrome by the end of 2023, additional challenges are looming over digital co-op advertising. This is why both brands and retailers need to redefine their co-op approaches to overcome these challenges.
Holistic Planning for Cooperative Advertising
Brands and retailers should join forces to build up their data capabilities and drive more co-op investment towards online channels.
Media agencies should also be more involved in the planning of the cooperative budget spent, as they can bring a lot of value to the table by strategizing this budget to align with the brand and the retailer objectives. They also have more resources to optimize ads into placements that matter the most.
It is easier said than done, but with the challenges ahead, collaboration is a must for growth.
The extreme changes the retail industry experienced in 2020 with a global lockdown and store closures have forced everyone to reconsider the current ways of doing business and advertising. Every dollar matters, and efficiency is more important than ever.
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Brands should take ownership of the co-op budget and invest in multiple retailers, so that no retailer can monopolize the entire co-op budget alone.
A true holistic planning is needed to identify the role of each party involved: retailers can use this budget to retarget hot prospects, while brands and agencies should focus on reaching a wider audience.
To unlock the true potential of digital cooperative advertising, marketers should embrace holistic planning to build a co-op strategy that achieves both brand and retailer objectives, while respecting user privacy. At dentsu, we have extensive commerce experience and capabilities to support your brand.
To get started or get further with your commerce strategy, contact us today. Download Shopper DNA: The Future of Retail here.
