Over the last few years I have been increasingly hearing from vendors and their channel partners that co-op funds just aren't meeting the desired objectives of both parties. Of course, the understanding that each has of these objectives can vary substantially.
Fundamentally, vendors and their resellers must design programs up front to reinforce a unified set of marketing objectives that help drive incremental sell-through. At the end of the day, sales is what it's all about.
Let's look at some guidelines that may assist in joint channel marketing efforts:
1) Be sure to set long- and short-term objectives for your funding programs - beyond `meeting competition' or `increasing channel mindshare'!
2) Flexibility in fund usage provides fertile ground for innovative ways in `spending' those dollars where both parties are heroes.
3) Determine who actually has control of the soft funds accumulation and status in both camps.
4) Those from the channel side of things, remember that these are real marketing dollars to be used in worthwhile field marketing activity - not to be added to the bottom line.
5) Vendors need to understand that it is not always possible or wise for resellers to spend the dollars up front prior to claiming them.
6) Resellers need to keep their finger on the pulse. Too many resellers allow the accrued co-op funds to lapse in the limited time available to use the funds.
Depending on the vendor, soft dollars tend to break down into a few key areas: co-op funds, market development funds and incentive rebates.
Co-op funds: These are being targeted for fund reduction because they're usu-ally offered to the channel with relatively few strings attached. Fund expenditures are regulated but allocation of the actual funds is rarely tied to a specific performance criteria.
In theory, co-op funds, by design, help keep program utilisation fair and equitable across resellers; however, because fund allocation is viewed as indiscriminate and often not tied to specific objectives, it has been the prime target for fund reduction.
Market development funds: These fall into the discretionary basket. Manufac-turers use the funds to support account-specific activities not normally funded through traditional co-op funds. It is no great surprise to hear that this form of funding is on the increase - the manufacturers perceive they have more flexibility and control over these funds - while co-op allocation is on the decrease.
This is where energetic and creative resellers can make real inroads in receiving increased funding. Strong relationship building and lobbying skills help! In essence, by providing a detailed plan or proposal, well costed out with clearly defined objectives and manageable strategies for a unique or, at least, highly differentiated marketing approach ensures MDF funding today.
MDF programs tend to be highly proactive, requiring long-term planning, whereas co-op fund expenditure is often a reactive and opportunistic activity.
Incentive rebates: I am no great lover of these but it appears that this is a fast-growing category within the soft fund segment, often partially funded by reductions in co-op accruals.
Ideally, the cash rebates should be tied to specific measurable performance criteria - such as increased sales of a specific product or category over a defined period.
There is genuine skill needed in using rebates wisely so as not to damage the market place. It is easily understood that, as margins erode, the cash rebate is an enormous assistance to the reseller community but when a program becomes an integral part of the cost of doing business, rather than a true differentiator, we had all better start thinking of new programs, pronto!
Dolores Diez is principal of IT marketing strategy and communications organisation Rivers of Communication. Reach her at email@example.com