Co-Op Funds and Marketing Development Funds often run in parallel between manufacturers and their channel partners (whether it be dealers, distributors, installers, or independent sales reps) as a vehicle to help grow sales.
Co-Op Funds, also known as Cooperative Funding, is a portion of a company’s sales and marketing budget that rewards their channel partners as they sell more products. This is a primary method in a Channel Partner Incentive Program – rewarding the buyers (dealers, installers, etc) for their loyalty to your brand and continuing to purchase from you.
Previously, Co-Op funds were given as account credits. Unfortunately, the account credits don’t create the mental link from the buyer between their purchase and your brand.
A more modern approach is to distribute the Co-Op funds as part of a rewards and loyalty program.
When the funds are loaded, the participant (channel partner) is sent an automated email with your company brand to tell them the rewards are now active. That’s the first piece of the brand loyalty linkage in the participant’s mind. Then, when the participant goes to your branded rewards website, they see your Visa Digital Debit Card, new product and marketing sell sheets, and an online shopping experience. When the participant spends their reward dollars (i.e. your co-op funds) on a pair of sunglasses, every time they wear the sunglasses, they think of your brand.
These multiple brand impressions (and marketing emails) create the linkage between their purchases with your company and your appreciation of their loyalty – resulting in future sales.
Market Development Funds (MDF), on the other hand, are often distributed prior to sales occurring. These funds allocated by manufacturers are sent to their channel partners in the hopes of future sales.
The funds can be allocated for branded company signage, costs for their channel partners to attend events, or allowing the channel partner to have discretion on what and how to use these funds.
While they are a component in the marketing umbrella, we caution overly using MDFs since those funds aren’t linked to transactions or sales.
Co-Op funds, when used in a Channel Partner Incentive Program, are directly linked to sales and the rewards are only paid out when the buyer purchases from you – a guaranteed ROI.