What's The Difference Between Co-op Fund Marketing and Market Development Funds?
MDF is one source of funding that vendors provide channel partners. Co-op funding is anothe
r. Although the terms co-op and MDF funds are often used interchangeably because of certain similarities, they are not the same.
1. The first important difference is allocation and timing.
Companies provide MDF funds to channel partners before sales or marketing take place, and they provide co-op funds after sales have taken place. Co-op is retroactive. It is reimbursement. MDF happens before partners’ initiatives begin.
MDF funds the development and execution of particular sales and marketing activities. That means that vendors and partners discuss proposed sales and marketing plans before corporate allocates the MDF. Corporate determines an appropriate amount of MDF. Once those programs are launched, partners provide detailed reports containing the number of leads received and customer conversion rates.
2. Another big difference between co-op and MDF funds is ownership.
Partners accrue co-op funds as a percentage of their prior sales. Although companies offer co-op funds more broadly to most channel partners, the percentage of funds received may increase or decrease according to sales. Companies can institute rules dictating how the funds can be used, but once sent, co-op dollars belong to channel partners. The granter cannot take them back.
MDF is different. Vendors allocate MDF to select channel partners at their discretion, before any partner initiatives take place. And corporate can manage MDF funds during the partner efforts they fund, depending on sales and demand generation.
Because co-op marketing funds are accrued as a percentage of prior sales, vendors normally grant co-op funds to proven high-volume sellers, such as distributors, and partners who have already sold their product, which encourages them to keep marketing them.
3. A third difference is duration.
Channel partners use co-op funds for long-term marketing activities, and co-op gets budgeted for a set amount. MDF dollars are often used for more short-term activities, including one-off webinars and tradeshow attendance.
Wondering Which Is Right For Your Business: Co-op or MDF?
Companies don’t need to choose one or the other. They can provide MDF to a small, select group of channel partners who have the largest sales potential while they provide co-op funds to a broader group of partners as a percentage of their future sales.
Interestingly, one factor that unites MDF and co-op funds is that both sources are often underutilized. Not all companies do a good job educating partners about the MDF and co-op funds that are available to them. When partners do utilize these resources, fund management programs are not always designed in a way that’s easy for partners to use. Poor navigation and archaic sign-ins can discourage usage, so upwards of 70% of co-op funds
, and between 30% to 60% of MDF funds
, go unused. That amounts to between $15 and $30 billion MDF dollars that could have been spent driving sales and local brand awareness.