The Difference Between Co-Op Marketing Funds and Market Development Funds
Co-Op Marketing Funds and Market Development Funds (also known as MDF) are two types of local marketing funding sources. These funding sources are typically used by companies that use a Distributed Marketing strategy, meaning they sell their products or services through a network of local reseller partners including retailers, dealers, distributors, franchisees, agents, brokers, branches or multi-locations. Both Co-Op Marketing (also called Co-Op Advertising) and MDF are funds management options for brands that want to subsidize the cost of local marketing for their local partners. There are key differences between Co-Op Marketing funds and MDF. Let’s take a look at scenarios that could make one type of co-funding option more suitable than the other. To avoid common pitfalls, it is also important to ensure that the funding options offered are aligned with a brand’s strategic goals and the make-up of its partner network.
Using Co-Op Marketing and MDF as Incentives
Co-Op Marketing Funds can be set to accrue based on local reseller partners’ percentage of sales. These funds are typically used to reward or incentivize local resellers — by tier, class, region or individually — based on their level of sales performance.
MDF may be issued to local resellers in advance of sales. This is discretionary in nature, because it is awarded based on predicted or expected behavior.
Choose Co-Funding Options to Fit Your Brand
MDF sponsorship fits well within dynamic markets, where local resellers’ past sales are not necessarily the best indicator of how current or future co-funding budgets should be awarded. For example, a brand may dedicate more MDF to local resellers that promote a product very early in its lifecycle, when those resellers are likely to close more sales with a consumer base known as “first adopters.” Those resellers may not generate the most sales within a given tier or region, but they have a valuable and unique link to first adopters and the ability to get traction for early lifecycle products in dynamic markets.
Co-Op Marketing Funds, on the other hand, are a more stable co-funding source. Co-Op Marketing allow local resellers to plan long-term marketing activities based on available budget. These funds are typically better suited for local channel partners that demonstrate consistency in large-volume sales.
Whether brands opt for MDF or Co-Op Marketing Funds, or a combination of the two, in order to offer the right co-funding mechanism and promotional allowance to the right local resellers, brands need to have a clear insight into their channel partners’ sales performance. This gives companies the ability to align brand-to-local marketing strategies — which can give them the edge over competitors in local markets.
Common Co-Op Marketing Mistakes to Avoid
When the funds from Co-Op Marketing or MDF goes unused, it is a clear sign of misalignment between the brand and its local reseller network. Here are some common pitfalls and solutions for how to avoid them:
Mistake: Brands don’t provide preconfigured local marketing programs for channel partners to opt-in and spend their promotional allowance.
Solution: Brands can use local marketing automation solutions, such as a comprehensive Distributed Marketing Platform, to give their local resellers an easy way to select, subscribe and execute pre-approved, brand-compliant marketing collateral and flexible financial plans.
Mistake: When partners are required to follow a brand’s cumbersome claims and reimbursement processes in order to access co-funding options, they often find those processes to be too complicated and time-consuming.
Solution: Brands can simplify how their partners access Co-Op Marketing Funds by offering an instant co-pay method that immediately covers the brand’s portion of up-front costs, or by opting for a more advanced claims process available with a comprehensive Distributed Marketing platform. Click here to learn more about a patented option that allows brands to make both claims and reimbursement and instant co-pay available to their local reseller networks on the same platform.
Mistake: When local resellers create their own local ads and campaigns that are not preconfigured by the brand, this often requires a lengthy approval process that involves a lot of administrative work to verify brand compliance before reimbursement is approved.
Solution: Brands can choose a local marketing automation solution that brings all aspects of ad building and local marketing execution within a single centralized controlled environment of a leading Distributed Marketing platform. This means that local resellers can choose already brand-compliant assets with built-in customization options, then local marketing campaigns are automatically routed to brand-approved expert marketing service providers for execution and fulfillment.
Mistake: Manual co-funding processes and incompatible systems can make the entire local marketing process difficult for brands and their local resellers. For resellers, this means faxing or emailing proof of performance on local marketing in order to request brand approval and reimbursement, which tends to be a complex and frustrating experience fraught with delays. For brands, it can be difficult or impossible to retrieve data on local reseller performance and ROI on their local marketing. This makes it hard for brands and their resellers to align brand-to-local marketing strategy or to respond quickly to changing market conditions.
Solution: Brands can choose to eliminate all the issues associated with manual co-funding processes and incompatible systems by choosing an advanced local marketing automation solution. Today, leading Distributed Marketing platforms offer innovative solutions for all aspects of local marketing, including Co-Op Marketing and other co-funding options; ad building; brand compliance; automated local marketing execution and fulfillment; and marketing analytics. It’s important to find the right fit to meet the needs of both your brand and your local reseller network.