Hidden Money: Co-op and Marketing Development Funds
Posted by Lacey Wilcox | February 14, 2022
The nature of our work at Primitive allows us to partner with a lot of different companies. We’ve worked with businesses in multiple industries and of all sizes. Each comes with its own problems, but they all also have unique opportunities.
One such opportunity is marketing funding sources, and exists between manufacturers (or wholesalers) and their channel partnerships (dealers, distributors, sales reps, etc.). These sources fall into two categories: co-op marketing funds and marketing development funds (MDF).
What are Marketing Funding Sources?
Marketing funding sources are a vehicle (no pun intended) to help grow sales for companies who follow a Distributed Marketing Strategy. Don’t let all the names and acronyms distract you: you interact with these kinds of companies on a regular basis: farm equipment brands distribute their equipment to local stores and dealerships. The dealerships are the ones who directly sell this equipment to consumers. Both the wholesalers and retailers benefit when a dealership sells tractors, plows, etc. In order to increase sales to consumers, wholesalers offer marketing funding sources to help dealerships promote their products. These funds are an incentive for partners to sell more inventory, and as mentioned above, they fit into two main categories: co-op marketing funds and marketing development funds (MDF).
Co-op marketing funds
These are funds a manufacturer or wholesaler offer based upon a percentage of sales. These funds directly correlate to a dealership’s past performance. So if a car manufacturer sees that one of its dealerships is seeing a spike in sales of a certain car type, they might extend co-op marketing funds to jump on this opportunity and increase sales of this car while the opportunity is strong.
Typically, these funds are a bit more stable than MDF (below) because they are based upon performance that has already happened. However, they do come with some kind of strings attached: anything created with this budget will need to be approved or follow specific guidelines, and dealerships might be required to show receipts from purchases.
Marketing Development Funds
MDF, on the other hand, are given to a dealership or retailer in advance of sales in order to encourage sales. Typically, these funds are a bit more discretionary than co-op marketing funds because a wholesaler is trying to predict future sales. But these kinds of funds are incredibly valuable in markets that change quickly and require some influence (for example, luxury or sports cars).
While nuanced, one thing both funds have in common is that they are very much underused by wholesalers and dealerships.
How These Funds Can Be Used
These funds are a golden opportunity for both wholesalers and distributors/retailers. While the brand has to approve many things these funds are used for, their entire purpose is to grow a business. And the nature of the relationship between wholesalers and retailers means that what benefits one partner will benefit the other.
There are multiple ways for these funds to be used to help companies grow. Some companies use this money to fund loyalty programs for customers or to offer incentives for purchases. But these funds can also be used toward digital marketing efforts:
- Digital ads: Sometimes small things pack the biggest punch. Digital ads are a great way to get a return on funds invested. A carefully planned digital advertising campaign should help a retailer generate leads to come into their stores and convert them to sales.
- Website: A highly functional website is the greatest asset any company can have. If you have a decent amount of co-op marketing funds or MDF, it’s worth investing in a quality website.
Get the Most Out of Co-op Marketing and Marketing Development Funds
Whether you are a wholesaler or retailer, chances are very good that you already wear many hats. The last thing you need to add to your plate is how to figure out how to create digital ads or build a website.
That’s where we can help. We have worked with hundreds of businesses in many different capacities. The digital world is where we love to spend our time: we do everything from building software, to creating digital content and campaigns, to building websites, to running digital ads. Our team can do it all – we would love to learn more about your business to see if we would be the right partner for you. Let’s get started.