Trends in Co-op and MDF

Recently I was interviewed by an industry trade publication regarding trends in marketing coop and marketing development funds (MDF) and thought it might be helpful to share some evolving observations:

• Distributors, more than ever, are maximizing their coop usage, leaving few dollars “unused”.
• Manufacturers are trending towards reducing coop, or in some cases eliminating programs, but redirecting these funds to MDF so that they can target resources to fewer distributors.
• Reps are being asked, or are providing, more marketing funds out of their pockets than ever before. This is because of a reduction in manufacturer funds. Reps provide this level of support in deference to their relationship with the distributor, even in the face of declining rep commissions.
• Requesting MDF from manufacturers is more difficult if the distributor can’t show prior year performance of the activities, and more importantly, the sales performance. Superior growth is expected (although some manufacturers look at this as a cost of doing business or a retention tool).

One of the questions was “how can distributors capture more marketing funds”? Some thoughts are:

• It is important to know your manufacturers’ priorities. From a macro viewpoint, consider what they said their 2008 priorities are based upon our ElectroIndustry survey.
• Manufacturers are more receptive to targeted strategies that distributors bring to them and are willing to invest in performance-oriented strategies that drive sales. “Soft” marketing has limited value to manufacturers.
• While manufacturers are interested in sales, in today’s environment, at least at a corporate level, they are interested in brand visibility also.
• Application marketing (more than 1 manufacturer involved in a marketing strategy), also called solution marketing, enables distributors to utilize multiple manufacturers’ funds for 1 strategy, enabling a multiplier effect.
• Rather than “nickel & diming” a distributor for many activities, consider packaging the activities and presenting a strategy, with the desired funding level, and then deliver on the joint expectations. There are a number of different funding approaches that can work in this scenario.

Another area that was discussed was the opportunity for small distributors to request and utilize coop / marketing funds. While traditionally these distributors don’t believe that they have opportunities, thinking that they are “small”, it is important to consider that a “small” distributor may have “significant” market share in a small geographic area or a “significant/large” share in their selected market segment.

Being important in a niche can help a distributor receive out-sized manufacturer marketing support, especially from their top manufacturers. These are the companies to focus on. Typically the bigger challenge for a small distributor is conceiving ideas and having resources for implementation.

Ideas to alleviate this include:

• Small distributors should develop networks to generate ideas.
• Implementation resources can be developed, be they a part-time employee, a coop student, an intern or can be outsourced (either through an agency or through their marketing group)

With the economy slowing, marketing, and its associated funding, becomes more important. Creating a WIIFM environment for customers, promoting distributor and manufacturer branding, promoting new products and training customers on the changing marketplace (NEC, green, arc flash, etc) is critical to driving sales. Effective utilization of marketing coop / MDF can help companies achieve their goals.