Co-op Advertising Media Buys are Dying

Before we dive into this, let’s get a few things straight…

  1. We have no dog in this fight. We can get paid through co-ops or local funds just the same.
  2. My interest is in providing the best results for our clients at the lowest possible cost/contact. The co-op system is starting to prevent that from happening and it seems it will only get worse.
  3. Our clients, trust us to give honest, unbiased feedback about marketing. The only way we can maintain that trust is with brutal honesty even if, as Jack Nicholson so aptly puts it, “you can’t handle the truth!“
  4. It’s up to you to decide. A lot of what is being presented is very new technology so no one knows exactly how it’s going to play out in the marketplace. Our goal is to help you be prepared.

So now let me explain why co-op media buys are mostly dead already and how Google (and other sharp companies) are planning to drive the final nail into the coffin.

According to our 2011 Culligan Marketing Survey, the top 5 marketing expenditures in order of highest to lowest expense for dealers were as follows:

  1. Television
  2. Radio
  3. Yellow Pages
  4. Direct Mail
  5. Newspaper

As a side note, from the list above, only Yellow Pages had more than 25% of dealers claim it was one of their Top 3 lead sources.

Now let’s look at those 5 items and internet marketing at the co-op level…

Internet Marketing

SEO and SEM are absolutely best invested at the local level.

Other than very small co-ops in low population, large geography areas like we have out west, it’s hard to even argue that targeting internet traffic through SEO or SEM at the co-op level is a good idea.

With SEM, you can target an area as small as a 10-mile radius around an address so you can easily target just your PAR.

Our online testing overwhelmingly suggests that buying keywords at the co-op level is inefficient for 2 main reasons:

  1. All markets are uniqe. The keywords, ads, offers, and landing pages that work BEST in Flint (home of my alma mater) most likely will not be the BEST combination for lead generation in Ann Arbor (where I had my first co-op job). As a matter of fact, over 3-6 months, not a single one of our clients gets the best performance from the same combination of keywords, ads, offers, and landing pages as another one.
  2. Co-ops that include urban and suburban areas, usually result in the suburban areas SUBSIDIZING the urban leads. In co-ops surrounding a large city where you have a big dealer in the city and other dealers surrounding it, what you normally see is the urban areas are paying $50/contact, the suburban are at $75/contact, and the rural dealers are at $150/contact. Why? Because more people in urban areas are using the internet than in rural so the rural dealers are investing a disproportionate amount of money for the results they receive. I encourage you to do the research for yourself.

With SEO, you need to target your local cities.

In other words, if you optimize your site for the word “water softener”, good luck because you are competing with Culligan.com, Wikipedia.org, HowThingsWork.com, Easywater.com and other major players.

However, if you optimized for “water softener pittsburgh pa”, now you have a shot.

The more cities you have to optimize for, the harder it is to target each city on a single website.

The only SEO advantage to one main co-op site is that a single site representing 10 dealers will have roughly 10x more backlinks than one representing a single dealer and backlinks are very important for SEO.

But now we’re back to, how can one site for 10 dealerships target the best results (offers, local water quality, pricing, etc.)  for each of those 10 dealerships?

Newspaper

You may have noticed that print newspapers are a dying breed.

In case you didn’t know it, with Google, you can target individual newspaper websites for Display Advertising (which has nothing to do with keywords) so you can still reach your local target market.

You can also often buy space on your local newspaper’s website but that’s generally more work, more expensive, and less efficient than doing it through Google’s Ad Network.

Direct Mail

In 2008 at my dealership, my ad agency sent me a map and allowed me to choose the mail carrier delivery routes where I’d like our direct mail pieces delivered.

I’m not talking about targeting a city or a zip code but often just a single road or housing plan.

If you can target that specifically, you’ll often get better results than targeting a single direct mail piece for your entire co-op.

Yellow Pages

Some major cities have stopped printing Yellow Pages altogether and it’s just a matter of time before that trend pushes further and further into the country.

So if customers and prospects are not using a phone book to find you, how can you make sure they can find you?

  1. Have a mobile marketing plan together. One of our clients has 24% of his SEM traffic from mobile devices (not including tablets) so, if you are in a mobile-friendly market, you need to understand and target those visitors differently.
  2. Make sure you’re up-to-date in the online directories. At last count, there are about 35 “major” online directories so you need to have up-to-date local information in each. If updating 35 websites doesn’t sound like a lot of fun to you, we can do that for you.

Either way, this isn’t a good investment at the co-op level.

Radio

This is the lone detractor… Sort of…

Radio on AM, FM, or Sirius/XM obviously can’t be targeted any more locally than currently. I’m not aware of any technology that’s going to change that any time soon.

However…

I haven’t listened to an FM station in years and probably 80% of the time I listen to music on Pandora.com. Spotify.com, Radio.com and a host of other internet radio stations that are increasingly gaining popularity.

With online radio stations, we can target a specific area similar to Google Adwords and Facebook.

So radio is currently the best argument for co-op funds I’ve come across. With the advent of ubiquitous wireless access in cars and the growth of internet radio stations, at some point, even radio will be much more highly targeted, though.

Television

Which brings us to the largest marketing expense for most co-ops and dealers… Television.

Surely this will still need to be co-oped, right?

Nope.

Here’s the play-by-play:

  • Your TV service, internet, and phone are now coming into your home on the same data line – either FiOS or cable.
  • DVR boxes for your TV service are becoming nearly ubiquitous.
  • For several years, companies have been testing with allowing the DVR boxes to track what terms you are typing into your internet search box (remember it’s all on the same data line) and then showing you TV commercials related to those searches.
  • Recently, TV companies have started partnering up with streaming web-portals (which is fancy wording for how you could watch the Olympics on your smartphone, computer, or iPad before it hit TV) to sell TV ads on those portals.

In comes Google:

  • Google bought YouTube a few years back and now gives you the ability to target people in your geographic area watching videos about a certain topic. In other words, if you own a Harley shop and someone in your area is on YouTube watching videos about Harleys, you can show them an ad or even a video. This is currently available to you. This isn’t the future.
  • In the last few years, Google has invested half a billion dollars in data lines in the Kansas City market. These data lines are 100x faster than your current high-speed internet and will include TV service, internet and phone.
  • Google also has started negotiating directly with the content providers (i.e. ESPN, TNT, FOX, CNN, MTV, etc.) to buy content for their network to provide TV programming. In other words, they are cutting out Comcast, Time Warner, Charter and the other cable companies to make their own TV company.
  • In late August 2012, Google’s Adwords interface now allows you to target an area based on Nielsen DMA’s. In other words, you can buy keywords today based on the same geographic targets TV companies utilize through Nielsen.

Now this is complete conjecture since Google hasn’t officially announced this yet, but what do you think Google plans to do to generate marketing revenue with their new TV service?

My bet is that they are going to improve, simplify, and streamline the ability to target TV sets in a specific geography to show TV ads based on the internet searches done at the computers using the same service.

The bottom line is that TV advertising is going to be hyper-targeted and no longer done efficiently at the co-op level.

When will all of this happen?

Internet marketing should undoubtedly already be done at the local level barring the geography and budgetary exception I mentioned earlier.

Some of these items, like Yellow Pages, online newspapers, and internet radio stations, are well on their way to transitioning to a local focus.

Television, is still in the early stages so it will take at least a few more years to make that reasonable to buy locally.

So the real question is, are you preparing to control more and more of your money at the local dealership level to account for these current and pending changes in advertising?

To your marketing success,
Bryan

P.S. The power of a great idea can often be measured by its level of resistance. If you find yourself “resisting” this information, hopefully you can appreciate that my job isn’t to make you feel good. It’s to present the facts. If your facts indicate I’m wrong, I’m always interested in feedback so please let me know.