Why Co-Op and MDF Funds Go Unused

James Morse | September 8, 2020

When we talk to organizations about fund management, we are constantly asked why co-op or MDF funds go unused at the local level. Unused funds are a recurring problem among corporate marketers. In fact, close to half of the roughly $70 billion allocated to fund co-op advertising programs every year goes unused. That’s almost $35 billion left on the table each year—a staggering amount of money. From a corporate perspective, developing a fund management program meant to support local partners only for it to be underutilized is vexing.

Each potential customer can be tied to a cost of customer acquisition (CAC) and a customer lifetime value (CLTV). Unused marketing funds show the potential customer loss and revenue missed from the CLTV. It can get scary very quickly knowing the amount of business your company may have missed due to lack of engagement in your fund management program.

Having insight into many companies’ fund management programs, we’ve identified a few common reasons why co-op and MDF funds go unused:

  1. Lack of transparency into available funds
  2. Complicated co-op or MDF program rules
  3. Not enough marketing support

Lack of Transparency into Available Funds

Channel partners rely heavily on channel funds—both co-op and MDF—to grow their businesses. The State of Local Marketing Report found that partners whose businesses grew 10% or more attribute co-op marketing as critical to their success. But for local partners to effectively use co-op or MDF funds, the program must alert them to the amount of available funds at their disposal. A major reason why co-op and MDF funds go unused is because some channel partners do not engage with the program at all and therefore don’t realize what resources are available to them. Owners and managers can get caught up in the day-to-day hustle of running the business; meanwhile, channel funds linger out of sight, out of mind.

Ask yourself: Are you making it easy for your partners to see how much they have available? Are you putting barriers in place without meaning to? Perhaps your channel partners have to call someone at corporate to get an updated amount of available funds. Perhaps you send the partner an email at the beginning of the program and expect them to keep track as the program progresses. Or maybe you’re still managing your co-op program with spreadsheets and there’s just not enough transparency into the funds. These examples are honest in nature, but often deter channel partners from fully engaging in the fund management program, if at all.

Complicated Co-Op or MDF Program Rules

Another common reason why co-op or MDF funds go unused is because corporate makes accessing the funds too complicated. Legal, accounting, and compliance teams are apt to insert a plethora of rules when implementing a channel funds program. These rules can help mitigate any risk of requiring corporate to pay funds out to a partner that is abusing the brand. Even so, there are better ways to streamline brand management. Having too many rules in place can complicate the entire fund management process for channel partners and discourage them from marketing your brand at the local level.

Examples of common complications are: complex approval processes causing delays in reimbursement; lack of approved vendors resulting in denial of funds because the vendors utilized don’t meet brand standards; and different reimbursement rates based on arbitrary, unclear guidelines.

Not Enough Marketing Support

Even if you’ve given your channel partners the funds to incentivize them to market your brand, they may not have the know-how or human capital to easily execute brand-compliant marketing at the local level. Providing proper marketing support—whether by giving your partners access to pre-approved customizable artwork or a list of approved execution vendors—is integral to their success. Channel partners are rarely marketers by trade, but they are striving to understand more about how to market effectively. Eight in 10 partners reported that they’re actually investing significant time to learn more about marketing to grow their business. Providing the necessary tools to help local partners market or broaden their skill set will encourage them to actively engage with your co-op and MDF programs.

These are the most common gaps we see with co-op and MDF fund programs reflecting poor commitment at the channel partner level. Identifying these gaps within your own programs is the first step to evolving your strategy to garner higher utilization and fund spend with the intent of growing customers and brand awareness.

Ready to Make Your Co-Op and MDF Program a Success?

Contact BrandMuscle to begin engaging your local channel partners and increasing co-op or MDF fund utilization today.

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