Co-op Marketing's Top 5 Challenges in 2019: Retailers' Edition (Part 2)

By Nikolai Lien

|

August 1, 2019

In this four-part series, we’ll be looking at the co-op marketing challenges retailers and brands must be ready to tackle in 2019. We’ll identify the top five challenges facing each side —and discuss how these challenges can be overcome. When discussing brands in this article, we are referring to manufacturer brands. Specifically, those supplying retailers with their consumer goods.

If you’re unfamiliar with online co-op marketing, check out our introductory article on the subject:

https://www.nyknowgo.com/post/thebenefitsofonlinecoopmarketing

For busy readers, we’ve provided a quick summary of the article’s content at the top. If you find the topics interesting, they are discussed in more detail below.

  1. Qualifying partners and breaking down brand reluctancy
  2. Process, execution, and scale
  3. Co-operation lives on a balance between transparency and trust
  4. Defining targets, framework, and the media mix
  5. Adding value beyond generating sales

If you missed the first three parts of this series, they can be found here:

https://www.nyknowgo.com/post/top-5-co-op-marketing-challenges-in-2019-brand-edition-part-1

https://www.nyknowgo.com/post/co-op-marketings-top-5-challenges-in-2019-brands-edition-part-2

https://www.nyknowgo.com/post/top-5-co-op-challenges-in-2019-retailer-edition-part-1

Co-operation flourishes on the balance between transparency and trust

Brands are demanding more transparency in 2019. Retailers must consider how they show transparency without weakening their own position. Retailers obviously don’t want to share their complete business numbers with brands just for the sake of a co-op campaign. Even if they did, giving away too much information can be detrimental to their negotiating power. Exposed profit margins, for example, will hinder discussions over procurement prices.. Still, the onus is on retailers to give brands a view of the co-op campaign’s performance. A situation where brands throw money in the retailer’s black box—with no way to gauge the efficiency of that marketing spend—proves increasingly untenable. Brands want more. The relationship necessary to facilitate online co-op is a continuum of these two parties’ respective needs. On one side is the brand’s interest in transparency and verifiability. On the other side is the retailer’s interest… and a desire to keep their data safe and private. A sustainable co-op venture can only ever survive with a balance between these extremes. Retailers will not divulge too much about their business to a different corporate entity with whom they trade. Brands won’t accept blind trust in retailers doing the right thing.

Trust remains key to successful cooperation. However, corporate relationships need more than this to survive. The retailer can still dictate how much they are comfortable sharing. That said,  they need to find ways to show brands how their funds are being used. Long gone are the days where retailers find blank checks easy to come by.

Defining targets, framework, and the media mix

Retailers may struggle to reconcile their own work processes with those of the brands’. Brand safety guidelines may diff significantly between the two parties, meaning that the tried-and-true marketing campaigns of the retailer may not be suitable for all co-op campaigns. Agreeing clear expectations early will go a long way to remedy this, but certain things will always differ from the status quo Following up on the issue of expectations, targets may be an additional source of contention. Particularly when attempting to work with smaller, inexperienced brands, their expectation for a performance target might be unrealistic. Overcoming this inexperience gap can be very challenging. It is rarely beneficial for a corporate relationship when one party claims “You’re wrong, and here’s why.” Co-op deals regularly occur when the retailer offers brands a “guaranteed” performance to sweeten the pot. Finding diplomatic ways to push back on untenable targets and demands will be of key importance for retailers looking for sustainable cooperation.

“How do you suggest we spend the co-op budget?” Any retailer hoping to gain traction in the co-op space must be prepared to answer this question when sitting down at the table with potential partners. This is an issue, because depending on the retailer, they may not have the expertise to answer that question with any depth or gravitas. Only performance marketers with experience in the relevant verticals and omni-channel marketing campaigns will even have a chance of giving a convincing answer. Part of the allure for brands is that they look to the larger, more experienced retailer to cover up for some of their own marketing deficiencies. If retailers can’t convince the brand that this is possible, the potential business is already lost. The retailer must present someone qualified to make a suggestion for the campaign’s media mix. How much should be spent onsite in the form of campaign banners, discounts, or sponsored search results? How much on traditional, external performance channels, such as display and search? How much on video and branding channels? Should a portion, or even all of the budget be spent on retargeting, or is raising awareness for the brand’s products to new audiences more important than incremental gain on existing customers? Further, is the retailer allowed to target all available traffic, or are searches including the brand’s name off-limits, as these people are already acquainted? The retailer must ensure it equips its negotiators to analyze the brand’s strengths, weaknesses, aspirations, and concerns. Only then can a mutually beneficial campaign be proposed. Cooperations based on misaligned whats, hows, and whys are bound to fall apart.

Adding value beyond generating sales

It could be argued that co-op is only beneficial for early-adopter brands. That sooner or later, all brands will be spending money on co-op, leaving none of them with higher marketing expenses and no competitive advantage.. This is a bit of an oversimplification. It’s also one that retailers can proactively overcome. They sidestep such objections by offering more than mere increases in sales through paid exposure. The retailer’s primary leverage over brands comes from its richer perspective. While the brands can evaluate how well they are doing by using themselves as a benchmark, the retailer can compare brands with other brands. They know each brand’s category share, how many people looked for each brand on the retailer’s website, each brand’s exact sales, and much more. Brands simply cannot know this with any degree of accuracy. By packaging the co-op efforts with promises of insights and extremely valuable business details, the retailer can move beyond such objections.. Even if the retailer grants them the most pessimistic view of co-op as a revenue driver in the long term, the insights alone should be sufficient incentive for brands to explore the opportunity seriously.

For retailers, leveraging their position as a marketplace galvanizes co-op as a viable strategy. It monetizes data which may only serve to assist the retailer in making navigational and SEO-related decisions in the present. Further, it can help mitigate the issues alluded to above regarding transparency and verifiability. Tried-and-true metrics such as Return on Ad Spend (ROAS) can be fuzzy – isolating co-op performance in the noise of other marketing activities is very difficult. However, retailer-owned metrics such as category share, or on-site search volumes, avoid many of these issues. If the co-op effort’s stated performance target is X% improved category share for three strategic product categories, determining a campaign’s success becomes a trivial task. Ultimately, retailers who find ways to utilize their positional advantages to the brand’s benefit will be the ones wholesalers want to work with.

Stay tuned to nyknowgo.com for more relevant industry content, released regularly.

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