Co-op advertising funds and Market Development Funds (MDFs) are two types of local advertising funding sources. Brands that sell their products through partners, resellers, retailers, distributors and, agents may utilize these funds to market locally. The two funding sources are often used interchangeably. However, there are slight differences between the two. These differences can help brands and their partners decide which fund works best for them and their strategy.
Co-op Advertising Funds
Co-op advertising funds are accrued. The amount given to the partner by the brand is based on a percentage of local sales. These funds are often used to incentivize partners to ensure that their advertising efforts meet the brands’ allotted sales targets. Co-op funds are used when partners and brands intend on remaining long term partners. This allows them to develop long term marketing plans based on an allocated budget. Long term co-op advertising is effective when sales for partners are consistent or growing. The consistency in sales makes the co-op program beneficial for both the brand and the partner. The brand reaps the benefits of the profit it gets from those sales and the partner receives funds based on those sales. Persistent sales are also an indication of dependable local partners. These sales metrics help brands determine which local partners to develop long term relationships with.
Mutual Development Funds
MDFs are allocated on the basis of a plan. These are based on a specific project or campaign. MDFs are often issued before sales. These funds are based on the predicted success or failure of a project. They work well with dynamic markets in which brands may fund partners based on a particular project or campaign. For example, these funds may be allotted to partners in order to advertise a new product. Partners often have access to a loyal consumer base. Brands can make use of their partners’ consumer base by advertising new products through them. New products
do not have a guaranteed success or failure rate. However, funds may be allocated based on success/failure predictions of that particular campaign.
Brands must carefully choose which type of funding they will provide to local partners. This depends on their strategy, product, resources, the current state of the market they are operating in, and the local partners they wish to collaborate with.