MDF and Co-op Programs

Streamlined and automated process for request-approve-claim- validate-authorize-payment cycle

Understand true performance of MDF and other channel marketing programs

Create MDF/Co-op budgets using top-down and bottom-up approach and track against actuals

Configure MDF and Co-op programs based on partner, product, or other criteria

Capture proof of performance

Accrual and payment authorizations

Market Development Funds or MDFs and Co-op funds are made available by a manufacturer or brand to help channel partners that are distributors, resellers, VARs, and affiliates to promote its products and create awareness. The biggest difference between MDFs and Co-op funds is that a vendor will offer MDF funds to channel partners before any sale transaction has occurred and Co-op funds are given after the sales transaction is complete.

For example, you may be launching a product into a new market and want to kick-start sales by providing a select group of your channel partners with funds to start selling into their customer base and specific vertical markets. Specific sales and marketing plans are discussed before the funds are provided to the partner at the vendor’s discretion. Partners must usually provide a detailed reporting of leads received and customers to the vendor.

On the other hand, Co-op funds are given to channel partners who have already sold your product to encourage them to further market your offering and sell more. Co-op marketing funds are accrued as a percentage of prior sales. The vendor or manufacturer often implements rules on how the funds can be used and pre-approval must be received prior to conducting any marketing programs. However, once the partner receives the funds, they are then owned by the partner and cannot be taken away.

Types of MDFs and Co-op Programs

MDFs and Co-op programs can be organized in different ways depending on the manufacturer’s objective. They can be made available for a specific advertising vehicle (i.e., store circular or direct mail), or a segment of affiliates the brand is trying to motivate or reward (for example, top-performers, average-performers, or low-performers). The way MDFs and Co-op funds are structured has an enormous impact on a channel partner’s willingness to participate in the program. Below are four common funding or program structures.

Stipend
Stipends give channel partners the freedom to use a fixed quantity of money (for example, $5000 per quarter) to opt-in to different marketing programs that the manufacturer makes available.

Fixed Quantity
Rather than providing a set dollar amount, some manufacturers provide access to a fixed number of marketing resources (for example, number of direct mail pieces) at no cost. The zero cost is aimed at motivating local affiliates with strong brand support.

Discounts
Manufacturers can subsidize the local marketing spend of their channel partners with discounted, but not free, marketing programs. Discounts help channel partners’ own marketing spend go farther.

Rebates
Manufacturers can also reimburse channel partners for money spent on an approved marketing program based on earned rebates.

Automate and Streamline MDF and Co-op Cycle

Incent4 automates and streamlines the entire “plan-budget-program-request-approve-claim-validate-adjust-authorize-payment” cycle for MDF and Co-op incentive programs as outlined below:

  • Planning and Strategy: Define clear objectives such as increasing brand awareness, driving sales, or launching new products. Determine marketing activities such as advertising, campaigns, trade shows, training programs, or digital marketing initiatives that will be funded.
  • Budget Allocation and Approval: Based on the overall marketing strategy, use top-down and bottom-up budget process to determine detailed marketing plans and budgets and set the total MDF/Co-op budget. This may be a fixed amount or a percentage of sales revenue.
  • Execution and Management: Launch MDF/Co-op programs with approvals based on the finalized budget. Funds are disbursed to partners according to the approved plans. This can be done upfront, incrementally, or as reimbursements. Partners execute the marketing activities as per the approved plan. They must maintain records and documentation of expenses and outcomes.
  • Tracking and Reporting: Track spend vs budget and the progress of MDF-funded activities to ensure they are executed as planned. This involves regular check-ins and updates from partners. Partners are required to report the results of their marketing activities, including metrics like sales uplift, leads generated, or brand awareness improvements.
  • Analysis and Refinements: Evaluate the return on investment (ROI) of MDF/Co-op programs to determine their effectiveness. This involves analyzing the impact on sales, market share, and other relevant KPIs. Use the insights gained to refine the MDF/Co-op programs, making adjustments to improve future performance and better align with business goals.

Based on the approved budget, partners can request or register incentive programs through the Partner Portal. The request is then automatically routed to the appropriate administrators for approval. Once the approval cycle is complete, claims are submitted via the Partner Portal and automatically validated and authorized for payment or credit. Proof of performance, such as a copy of a print ad, can also be attached to the claim and it becomes a part of the repository. If an MDF claim is rejected by the system, authorized administrators can review the claim details and perform a manual override, if necessary, with comments and an audit trail. Payment authorizations are automatically transmitted to the appropriate ERP or any other financial system for payment.

Gain Program Performance Intelligence and Eliminate Claims Overpayment

Double-dipping and claims overpayment are reduced dramatically with Incent4’s compliance controls, fed by cleansed and normalized sales data in real-time. Incent4 not only enables accurate and timely claims and incentive payments and revenue recognition, but it also provides sales, finance, and marketing teams with relevant insights. Monitor and analyze program accruals / exposure, program utilization, and program ROI. Use utilization metrics and ROI of past incentive programs to develop and fine-tune strategies for future programs. Incentive data and statistics can also be used to objectively measure partner performance.