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mdf and co-op

Why do MDF and CO-OP funds go unused?

  • February 11, 2016

Offering MDF and CO-OP funds is a proven method to stimulate market demand through channel partners. However, a recent industry study by PartnerPath indicated that over 25% of MDF and CO-OP funds are going unused each year. This begs the question why would channel partners not use “free money” to generate demand for their services?

We’ve been helping large brands manage MDF and CO-OP funds for over 40 years and we see three primary challenges that hold back use of the funds:

  1. Administrative Burden
  2. Partner Cash Flow
  3. Lack of Channel Marketing Resources

MDF and CO-OP Fund Administrative Burden

Large companies cannot simply write checks to outside entities without a good reason. To comply with corporate policies and regulations most MDF and CO-OP funds require a clear plan to use the money upfront and proof the funds were used for that purpose after the fact.

CO-OP funds are typically allocated as revenue is achieved. This means the smaller partners don’t have large sums of money to spend. The process of requesting funds and proving use puts a heavy burden on smaller channel partners. This causes the smaller partners to opt-out of the programs.

Partner Cash Flow

Now let’s assume there is a significant amount of money available to be spent. These funds are typically earmarked for demand generation activities (digital marketing, events, webinars, etc.).

The channel partner bears the expense of executing the program and they are reimbursed after submitting proof the activity was conducted. This request again needs to be approved by the vendor and then submitted to corporate finance for reimbursement. The reimbursement process will typically lag the spending by 90+ days. This means the channel partner is out of pocket the marketing funds for at least a full quarter.

Most channel partners can’t afford to fund the cash flow on a large marketing program. This is another big reason why they choose not to use the funds.

Lack of Channel Marketing Resources

Even if the channel partner is willing to suffer the administrative and cash flow burdens they still need marketing resources to use the funds. Most channel partners are a blend of sales, professional services and support personnel. If they have marketing resources they are very limited.

Unless the channel partner principals bring marketing experience to the table it is challenging for them to come up with plans to spend the funds. Even when they come up with plans they often don’t have the internal resources to execute them. This is why funds go unspent with the mid and top-tier partners in some channels.

How do I get my MDF and CO-OP funds used?

The first step to improving utilization of MDF and CO-OP funds is streamlining the submission and reimbursement processes. This is typically done through a system of online forms and workflow software.

Streamlining the administration does not address the third issue described above and will only address half the problem. The other half is best addressed through creating marketing programs that can be easily customized and executed by your channel partners. This alleviates the marketing burden while still leaving control in the channel partner’s hands.

Learn more about channel incentives, our Channel Success Platform™, SPIFFs, RebatesCo-Op/MDFvolume incentives, and sell-through allowances.

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