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Market Development Funds
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Market development funds or MDF are used in an indirect sales channel where
funds are made available by a manufacturer or brand to help affiliates, channel
partners, resellers, VARs, or distributors, etc. sell its products and create local
awareness about the national brand. Co-op Funds is a synonym for Market
Development Funds.
There are approximately 4500 Co-op programs in the US made up of 50 product
classifications on which some 50 billion dollars is spent each year. Slightly over
half of that 50 billion dollars offered to partners each year by Brands goes
unused because of uninformed partners implementation issues.
Funding Structures
Market Development Funds are structured in different ways depending on the
brands relationship with its affiliates (Open vs. Closed networks), the
destination of Co-op Funds (for direct mail, email marketing, local PPC, etc.),
and segment of affiliates the brand is trying to motivate or reward (topperformers, average-performers, low-performers). The way Co-op money is
structured is of paramount importance as it has immense impact on an affiliate's
willingness to participate in the brand's proposed marketing programs. Below
are four common funding structures.
 Stipend - This structure gives affiliates the freedom to use a fixed
quantity of money ($300 per month for example) to opt-in to marketing
programs that the brand makes available. Although affiliates have the
option to choose among a range of programs, brands tend to highlight the
programs in which they want affiliates to participate giving them
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prominence on the main interface of the Marketing Automation Platform
brands and affiliates use to collaborate.
 Fixed Quantity - Sometimes brands, instead giving a dollar amount,
provide access to a fixed number of items (ex. direct mail pieces) or
resources of a program (ex. local PPC) at no cost. The zero cost is aimed
a motivating local affiliates with strong brand support.
 Discount - Brands partially subsidize the local marketing spend of their
affiliates with discounted, but not free, marketing programs. Brands try to
convince affiliates that will subsidized marketing ROI on their marketing
spend will be positive.
 Rebate - Some Brands reimburse their local partners for money spent on
approved advertising. This approach is often not recommended because
Brands have a hard time motivating affiliates to spend their money first
and try to recoup it later through cumbersome reimbursement logistics.
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