Co-op Marketing's Top 5 Challenges In 2019: Retailers' Edition (Part 1)

By Nikolai Lien

|

June 4, 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 explain 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 reluctance
  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 two parts of this series, about the challenges facing brands, they can be found here:
Co-op Marketing's Top 5 Challenges In 2019: Brands' Edition (Part 1)
Co-op Marketing's Top 5 Challenges in 2019: Brands' Edition (Part 2)

Qualifying partners and breaking down brand reluctancy

The first major hurdle for retailers will be finding and convincing brands to cooperate with. Even once they identify and qualify the right brand, retailers may still face some resistance. Brands typically have experience with co-op marketing in an offline environment, but fewer have engaged in its online equivalent in any meaningful way. This carries with it some legacy challenges. Assumptions must be squashed, and expectations realigned, before progress can be made.

These are assumptions of where the budget should be drawn from on the brand’s side, some options include:

  • Discounted stock
  • Marketing development funds
  • Trade funds
  • Branding budgets
  • Performance marketing budgets
  • New, incremental budgets

Further, brands may worry that spending on online co-op might cannibalize their own direct-to-consumer businesses. Retailers must find ways to ease these fears for the brands, or risk losing them as potential partners. For retailers to succeed in doing this, they must understand how brands can benefit from co-op—and use this as the basis for eliminating brand reluctancy. They might choose to promote co-op campaigns as a vital component in boosting Customer Lifetime Value (through improving average basket sizes, say). Brands needn’t worry about funneling new customers away from their own website and onto the retailer’s if the campaign targets the latter’s existing customers.

Retailers will likely face communication issues. Much like we wrote about in our article Brand challenges (part 2), retailers may find that their point-of-contact on the brand side has no authority to green-light any co-op activity. A reaction to this requires planning., Patience and diplomacy will play a key role in the granting of access to all relevant parties.

Process, execution, and scale

Retailers must consider and define how their business should handle co-op, and how it should affect the rest of their business activities. How does the new, external co-op budget affect their business-as-usual marketing budget? How do businesses show brand partners that their funds did not replace existing marketing spend? How do businesses show brands that their investment brought incremental performance? Brands do not want to be in the business of subsidizing retailer growth. Retailers must establish clear processes addressing these questions and objections. Once terms have been agreed, the retailer must continually look to optimize the execution phase of the co-op campaign. Currently, it is not uncommon for retailers to go back to the brand with four or more iterations on creative concepts before getting approval to move ahead. Needless to say, this is a resource intensive state of affairs, and slows down the agility of campaigns drastically. Speed and real-time campaign management is one of the primary benefits of engaging in online marketing. So it’s imperative that retailers look to streamline co-op campaign management in the next few years.

What if someone identifies a fruitful recipe for co-op success? Does it scale? Retailers can work with thousands of brands at any given point in time. How does a successful pilot project expand into a fully-fledged marketing arm of the business? Are the processes for initiating, negotiating, planning, executing, and reporting still feasible when amplified to this extent? It would be a huge waste for retailers to spend countless hours and funds finding a workable solution for single-partner co-op, only to realize it will not work as a full co-op service available to all brands. Thinking about and designing for scale early on in the development life-cycle will protect the retailer from venturing too far down an obvious dead-end.

Stay tuned to www.nyknowgo.com for the continuation of this series. The next article will cover the final three co-op challenges facing retailers in 2019.

NY KnowGo is back for 2019. If you like our website, why not follow us on Instagram, Facebook, LinkedIn, and Twitter?

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