Do you know the difference between Co-op and MDF?

If not, you may not be leveraging either with the strength you could be—which directly affects your bottom line.

Both programs center on the vendor sharing part of the cost of advertising with the partner. But each program goes about it in a different way. Co-operative marketing dollars (Co-op), which may be more familiar to some people, accrue based on a certain predetermined percentage. The funds are set away periodically—say monthly or quarterly—for the partners’ use on mutually beneficial marketing activities.

Historically, vendors only end up paying between 30 and 60 percent of their co-op accruals because their partners either don’t collect or don’t perform marketing activities. Part of the reason for this could be the stringency of most programs, which lay out in no uncertain terms the way vendors expect that money to be spent; typically, on traditional advertising through radio, print, or TV. Partners sometimes feel these programs are being forced on them, and the result is that no one benefits.

MDF, or market development funds, are a more modern take on implementing a marketing allowance. These funds are discretionary, granted on a case-by-case basis to specific partners for use on both traditional and nontraditional marketing activities. These might include radio, print, and TV, but also go outside these boundaries by reaching out to end-users through seminars, online advertising, and electronic direct mail, to name just a few. Vendors might also offer MDF to partners who want to conduct sales training for the vendor’s product line, which ultimately increases profits for both partners.

Do you use Co-op or MDF? Both? Which have you found more effective (or problematic) and why?


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