Whose Role is Marketing Anyways?
In industries where customer purchases are highly influenced by distributors, channel marketing and channel marketing support are essential for success. If the distributor has the choice of which products to promote, the choice will be made based upon support offered, profitability opportunity and/or ease.
Channel marketing support comes in two forms – co-op marketing funds and market development funds.
Co-op marketing is when manufacturers and distributors share the direct marketing investment on support of specific initiatives. Typically these programs are accrual based and authorize distributors to utilize funds for specific purposes.
Market development funds are more flexible. These dollars are provided to distributors on an “as needed” basis to support customer-driven, performance-oriented strategies. Most MDF funds are used to implement integrated promotional strategies for manufacturers. While harder to manage, because most salespeople are poor marketers, research has shown that these programs have a greater ROI for manufacturers.
The challenge is in how to develop a program and what to offer whom.
Developing a Co-op Program
To create, or refine your program, consider these steps:
- Identify your objective. Is it to meet competition, generate greater distributor marketing involvement, focus on specific markets, be responsive to customer requests (formalize a process) or to create a competitive difference?
- Analyze prior marketing expenditures. Determine a Distributor Marketing Index (marketing dollars invested/total revenue). Are your top 20% of customers using 80% of your marketing funds? Who are your “good” distributor marketers?
- Determine where funds are currently being spent. Categorize by activity (ideally by customer).
- Identify competitive strategies.
- Solicit distributor and sales organization input.
- Identify marketing tools that effectively promote your brand and your products. Click here for ideas.
- Develop Co-op Program Management Tools
- Train your sales organization on marketing tools that work and on your program.
- Provide usage goals to your sales organization.
- Promote the program to distribution channel.
What to Offer Whom
“Any manufacturer who is still viewing all distributors as equal with regards to marketing needs a strong reality check.”
Director of Marketing, large manufacturer And different needs require different approaches.
Historically manufacturers offer a “one size fits all” approach to marketing, and then wonder why everyone does not use their funds. This is one of the reasons why typically 20-40% of marketing support dollars goes unspent – good for finance but bad for taking share. The challenge, for distributors, is that not all distributors have the ability to implement effective marketing programs. Be it capability, time, personnel or financial resources, a significant percentage of distributors will not use your marketing support.
An effective strategy incorporates both co-op funds and MDF. Marketing funding should be integrated with your distributor program and be performance based. “Better performing distributors” with greater needs should receive more. For non-performing distributors, alternative marketing promotions can be developed on a regional/national scale to leverage economies of scale.