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Why is digital co-op fund utilization so misaligned with digital usage trends?

Why is digital co-op fund utilization so misaligned with digital usage trends?

We’ve all seen and are aware of the incredible statistics! According to the “Digital in 2016 report” released by We Are Social, roughly 42% of the world’s 7.2 billion total population is connected online with 2.3 billion of them active on social media.

Here in the US, roughly 87% of our approximately 322 million population is active online – that’s 282 million users, with users spending a little over 6 hours a day online. That’s twice the average time spent a day watching television.  Roughly 59% of those users are active on social media, with 88% of them doing so using a mobile device.

Advertisers are taking advantage of this trend as well. According to eMarketer, in 2017, total digital ad spending will surpass TV advertising for the first time ever, with roughly $72 billion (or 35.8%) of the total media ad spend in the US projected to be spent on TV advertising versus digital $77.37 billion (or 38.4%) of the total ad spend in the US projected to be spent on digital.  Within the digital space, digital display ad spending will eclipse search ad spending in 2016 for the first time, with approximately 50% of the total digital spent being done within the combined categories of video, sponsorships, rich media and banners. 

 

US Total Media Ad Spending Share, by Media, 2014-2020

 

According to varying estimates, there are somewhere between $50 billion and $500 billion in co-op funds offered by manufacturers and available to their channel worldwide, yet roughly only 30% of the programs offer any support in the digital space. Even within those supporting digital efforts in some way, there is widespread confusion and frustration among the dealer channel and caution among the brands on that support. So, with so many potential consumers connected and so many advertisers shifting strategies to engage consumers in those medium, why is there such a disconnect between manufacturers and their trade channel when it comes to co-marketing and co-sharing costs within the framework of their co-op advertising programs?  Here are some potential reasons why, and what manufacturers should consider when designing program offering guidelines:

Firstly, co-op programs need to change their mindset about the digital medium. And it should be treated like other mainstream medium when designing co-op program guidelines. When radio and cable TV came along, there was a similar resistance to its adoption.  Even though it was more effective in certain product verticals, dealers continued to want to use print as that’s what they had done for many years. Clearly that has evolved. And so is digital, and quickly. Providing strong education, planning, resources and assets in the digital space to their partner channel is a must for all brands.  

Secondly, brands need to eliminate retailer barriers to digital advertising and customer engagement. In our experience, some of the barriers that dealers face are, resistance to change, getting overwhelmed by the rapidly changing environment and program requirements that require too much burden of proof of performance along with complex rules. According to a report by Netsertive and Borrell Associates titled “The Changing Face of Co-Op Programs”, both brand manufacturers and dealers expressed dissatisfaction, ongoing challenges and differing views on digital marketing in co-op programs. Half of brands cite a lack of digital marketing knowledge among dealers as the biggest barrier to digital co-op marketing success, while dealers mentioned  “too many rules” (38%), “too much paperwork” (38%) and “a lack of information” (31%) as their biggest challenges. Manufacturer program guidelines must encompass all digital platforms that create customer engagement online, simplify the guidelines on what is required for verification (not just on digital but across the board), and communicate them clearly to their partner channel.

Thirdly, technology in a vacuum is not the answer.  Many local businesses and retailers are very adept at running their businesses and taking care of their customers. Most are self described non-marketers, let alone being digital savvy. Many times manufacturers offer technology and automated solutions to their dealer channel and end up getting little to no adoption. Many dealers just want this done for them. Manufacturers should strongly consider providing concierge services to augment the technology that makes it seamless for the dealers to have a strong digital presence – by doing it for them.

If you have questions or would like to learn more, please contact us or drop me a note.

Cheers!

Signiture

Pankaj Monga

President/CEO

Channel Fusion

Categories: channel fusion, digital fusion, co-op funds, fund utilization

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