It all revolves around planning.
For years many distributor marketing initiatives were conceived “last minute” with the knowledge that they had access to manufacturer co-op funds. Many felt that these funds were an entitlement. Some enriched local premium companies with last minute orders at the end of each year to utilize “their” expiring funds.
In the words of Bob Dylan, “the times they are a changin’“
Feedback that we are receiving from a number of distributors is that they have received letters from manufacturers (similar to this letter from Cooper Crouse Hinds) that they are stopping, or changing, their co-op marketing programs. We have heard that IDEAL, Lutron, Hoffman and others have made changes. Instead of co-op for all, they are moving to market development funds (MDF). These are marketing funds that the manufacturer has allocated for investment into distributor marketing plans that they feel will help drive both companies’ performance.
MDF requires planning. It requires the distributor to develop a plan for their company; for the distributor and manufacturer to develop a plan to drive performance; and for there to be some quantitative or qualitative criteria to justify investment. Typically the decision to invest is at the corporate level, with local sales forces participating in the planning process.
The change from co-op to MDF has been slowly coming. In a 2006 CMG survey, only 54% of manufacturers felt their co-op programs were effective and 57% couldn’t correlate their co-op program to sales success with specific distributors.
MDF has been successful in many other industries. Additionally, it has the ability to channel resources to supportive distributors and can be a precursor to changing distributor authorization and distribution support policies.
For a distributor this means that planning your strategies to succeed and communicating them to your manufacturers is critical to receiving joint funding. This is important given the current “joint planning” season that many are engaging in. Joint planning infers joint resourcing. Both parties should expect each other to contribute ideas to drive growth, and then to contribute appropriate resources (funding, personnel, training, merchandising tools, inventory, etc).
With the game changing, distributor marketing planning will become more important. While some will think the funds are targeted solely at large companies, we’ve had experience in helping distributors of all sizes develop strategies to drive success with manufacturer support as well as helping manufacturers rethink their marketing funding initiatives and distributor support strategies.
How do you feel about the change from co-op funds to MDF? How will you go about planning to capture, and use MDF?
2 Comments
There are very few places in the wholesale world where money is wasted like Co-op funds. In my time I have seen Co-op funds used to pay for everything from owners pet projects (Synphony, Museums, Habitat for Humanity) to manager junkets (fishing, golf, hunting trips)to employee give aways (jackets and shirts).
Rarely is there a measurable process.
I like MDF funds, but they must be administered fairly and by a field sales team that “gets it”. The ball is not in the manufacturers court to raise the bar on their own teams in the field.
This revelation is a double edged sword. On the one hand, it eliminates wasteful spending on impotent promotional efforts by distributors.
On the other hand, it could serve to restrict funds for use on well targeted, well constructed marketing initiatives that require discipline, step by step execution over a number of months or years.
The number of distributors that know how to write a decent market development plan is not a long list.
Therein lies the opportunity for manufacturers. They could see that distributors are educated on how to do this.
A few warnings:
1. Most distributors will be in panic mode and will not be able to concentrate on something like this for long. Their tactical nature is not conducive to multi-step initiatives executed over time. They are easily distracted.
2. Most manufacturers don’t know how to teach this anyway… they need to hire somebody to teach it that knows the game. They won’t see the opportunity in this god-awful recession that is getting worse by the day.
3. Make sure you stay legal in disbursing the MDF
The real opportunity is for the distributor that gets it, sharpens up their market planning abilities and goes for all the MDF they can get before anybody else does.
That’s a short list…. so go for it smart distributors.
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