Digital Co-op Ads Are Ignored by Some SMBs

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If retailers increased their attention towards co-op digital advertising, their profits might also increase.

According to a Borrell Associates report, the co-op digital ads marketplace during 2012 will reach $1.7 billon. And 70 percent of 1,345 small and medium-sized businesses recently surveyed were not using this form of advertising, leaving money on the table, said the Williamsburg, VA-based SMB research firm.

Co-op advertising has been around for years, and is designed to be a cost-effective way for manufacturers and retailers to work together on marketing campaigns. After a retailer buys the co-op promotion, the manufacturer normally sends the merchant an ad to customize or localize. Sometimes the manufacturer simply sends product images and copy and leaves putting the promotion together to the retailer. Whatever the case, the manufacturer then must accept the retailer's ad before it goes live.

After the digital ad campaign runs, the retailer will get a certain amount of credit against future orders from the manufacturer. If the retailer uses the credit and sells the product, the return on investment for its initial co-op ad purchase lifts.

Kip Cassino, executive VP at Borrell Associates, said the retailers' product credit often equals around 50 percent of the co-op ad purchase. "Sometimes, it's more than 50 percent," he said.

The manufacturer, theoretically, might see a higher conversion rate and more sales when the merchant customizes or localizes the ad. Nowadays, a $1.7 billion slice of the co-op pie - overall $22.4 billion during 2012, including offline - is in digital, Borrell Associates says, while estimating $450 million in potential digital co-op ads will go unused.

From the company's report: "As one digital seller told us, 'The amount out there is crazy.'"