Marketers have long relied on co-op advertising as a means of highlighting their products to retail consumers. In fact, the value of co-op advertising with retail partners like Walmart, Target, Macy’s and others was intuitively thought to be so high (or, in the least, an unavoidable cost if you wanted to work with certain retailers) that for decades brands accepted there was no real way to understand the ROI on their co-op dollars. In short, co-op advertising was a necessary “black hole.”
Then, of course, Amazon came along and changed everything. Now that the digital giant has re-envisioned the brick-and-mortar co-op advertising model as a digital endeavor, advertiser expectations regarding transparency into those dollars is shifting fundamentally.
Co-op advertising, in which manufacturers chip in on retailer promotions featuring their products, was proposed back in 2012 by an IAB study to be "digital's lost opportunity." And a big opportunity, at that. For various reasons, it's been historically hard to quantify the value of co-op advertising in the U.S. or worldwide. One estimate, as of the 2012 IAB report, put U.S. spend at around $50 billion, while another study put worldwide spend at a mind-blowing $520 billion.
Of course, those figures include in-store displays and flyers as well as external-facing advertisements. But the one element that has traditionally been only a minor part of that spend has been digital ads. And because of the traditional co-op advertising mindset (“You throw money in, then you cross your fingers and move on”), even the digital portion of co-op spends have not been held accountable in the way that advertising through other digital channels has.
As the retail marketplace has continued to reorient around Amazon, so has the old-school co-op mindset. With its Sponsored Products ads and retargeting product, Amazon has effectively created a performance marketing channel that employs the “we win together” principles of co-op advertising. It has effectively joined the ranks of the traditional co-op advertising retail players, but it has done so with bigger budgets and the lure of greater transparency.
Consider it yet another “Amazon effect.” Now that brands have adapted their marketing to align with the world’s biggest retail player, they’re taking the lessons from that process and applying it to their other relationships. Accordingly, brands are becoming more demanding. They’re requesting transparency and measurability from other retailers that benefit from their co-op dollars, and these retailers are struggling to put the needed mechanisms in place to accommodate such requests.
Yes, another retail sea change can be attributed to Amazon. And certainly the push by advertisers to better understand how their co-op dollars are being spent is a laudable and necessary one. But Amazon’s influence on this shift might be based more on perception than on practice. Questions remain around Amazon’s Sponsored Products and retargeting solution—dogged ones about, yes, transparency.
Both Sponsored Products and Amazon’s retargeting solution struggle, by design, with attribution. There’s no getting around the fact that, as a retargeting vendor, Amazon is grading its own homework when it comes to tying ad exposures to sales. As a result, there’s a notable gap between the numbers that brands are shown by Amazon and the true bottom-line impact of those investments. Amazon has clearly understood the low efficacy of re-targeting and deferred costs to partners who may not be inclined to (or understand enough to) question the numbers.
[New York] Know Go is coming. Click here and receive:
- Full access to all talks and panel discussions
- Private meeting rooms during the event
- Networking dinner with selected Retailers and Brands
Retailers and brands alike are missing out on the opportunity to co-ordinate media strategies and ROI. Learn more about executing a modern, digital retail co-op here.Read more
What is the relationship between brands' co-op dollars and ad performance?Read more