With 99% of co-op dollars spent offline, national brands are missing a massive opportunity to reduce marketing costs and generate leads for local affiliates, according to a new report by Marchex. The study, which analyzed data from past campaigns on the platform, found that by centralizing local marketing campaigns traditionally left to less-savvy local affiliates brands can dramatically improve the impact of their local efforts.
For brands, the economic impact of coordinating local marketing efforts at national level comes from two existing inefficiencies, says John Busby, SVP of the Marchex Institute, the call tracking company’s research wing: “When local marketing solutions are sold to [small and medium-sized businesses], the price of the lead has to include the overhead to provide account services for that local biz,” he told Street Fight in an interview. “If a national program takes that [responsibility] from the thousands of local reps, it removes huge amount of overhead and allows the average price of the leads to reduce.”
The other part of the economic argument comes in search advertising. Often, a national brand and their local affiliate will compete with each other over a branded search term, leading to a “significant inflation” of the auction price, according to Busby. By bringing the local and national search efforts under one roof, the brand can substantially reduce the cost-per-lead for both parties.
But centralization isn’t just all about cutting costs — there’s a quality component as well. In digital, the technology, which underpins the local marketing ecosystem is complex, and the platforms and properties through which a consumer engages with a brand locally are fragmented. Since 2007, the average number of media sources that small businesses use to market themselves has grown from 3.0 to 5.8 today.
Fragmentation however, is only part of the problem. Studies show that consumers tend to seek local information more often on a mobile device than via desktop. That means that instead of visiting a company’s website and then navigating to a store locator, mobile consumers will likely engage with their local affiliate either through the phone or a listings site.
In considering a shift toward a centralized approach, however, brands need to plan to build out ancillary services to support a centralized approach, says Busby. That means making sure there’s added corporate staff to help liaise with local businesses or regional management, and ensuring that the necessary technology is in place to manage leads at the local level effectively. For instance, mobile users tend to convert through the phone more often than their desktop counterparts — however, many of those calls are accidental. Parsing out which calls are quality leads and making sure that those leads are indexed and responded to in a short time is not a trivial feat.
The opportunity is massive. Busby believes that the bulk of the marketing spend will come from co-op dollars, which are largely tied up in offline media. And it’s a big chunk of change. Estimates range from $50 billion spent in the U.S. to over $550 billion spent worldwide per year, and less than 1% is invested online. Compare that to the 20% of ad dollars brands are allocating in digital today, and a shift in spend appears imminent.
Steven Jacobs is deputy editor at Street Fight.