The key elements of business are products, marketing, sales, support, and operations. A product that provides a clearly-definable value is the price of admission to any business, but marketing (if done creatively) can tell the story of that product (or its vendor) in a way that amplifies the perception of value to the intended viewer and/or listener… in this case, audiovisual and digital signage integrators.
You “simply” create a marketing message, send it to the integrator and hope that they open it, read it, and then do something about it. What is often missing or misunderstood is the second part of the marketing equation. This entails and embraces the concept of marketing “with” integrators.
This is what is commonly called distributed marketing. It is the collaborative process of marketing a manufacturer’s products or services through a network of local channel partners who can customize marketing materials for their markets.
As one expert opined, “It literally distributes the responsibility of producing and implementing marketing across an organization’s distributed network.”
The company might be a regional, national, or a global operation. If that business sells through a network known as channel partners, then that business is what is known as a distributed organization, and a distributed marketing strategy can drive both overall and local sales.
Done properly and addressing the concepts of “with and we” as a win/win approach, marketing can help seal the deal in doing business with an integrator. This is where co-op marking comes into play. In the integrator’s mind, this can be the difference in being a partner, rather than just a vendor.
Think about it this way… now both parties have mutual skin in the game. This shifts the paradigm (for both!) and focuses everyone’s attention on joint marketing as a proactive partnership aimed at the integrator’s clients.
At its core, a co-op marketing program expands a manufacturers marketing footprint by utilizing their channel partners. For this to work, there must be benefits for both the manufacturer and the reseller/integrator. Again, the focus should be on win/win. The idea is for manufacturers to drive sales though marketing on a national level and their “partners” (the integrators) to drive sales on the local and/or regional level. This is the expanded footprint we speak about.
At the top of this programmatic pyramid, the manufacturer creates and develops their overall marketing message and value propositions. Then they create marketing materials (logos, graphics, brochures, etc.) that have their corporate stamp of approval.
In many cases they create a set of usage rules or guidelines governing not only how they use these materials but also how their channel partners can use them. These are the creative assets of the co-op marketing program.
Uppermost in everyone’s mind is cost. The manufacturer provides co-op marketing dollars (varying contribution amounts or percentages by manufacturer and program) to an integrator who agrees to take part in the program. A manufacturer may cover the entire or partial cost, as reimbursement levels on more sophisticated programs vary by tactic.
Co-op funds typically can be used for anything from point-of-sale displays to digital ads, promotional items, and in some cases, offset other costs that directly contribute to the success of the program.
Many co-op marketing programs are fixed, but others may provide a degree (or in some cases a lot) of latitude. Depending on the program’s sophistication and the size or importance of the channel partner, the manufacturers marketing assets may be customizable so that the messaging is more relevant at the local level covered by that partner.
Most often channel partners can select which tactics they want to employ and use their co-op dollars to cover the costs within the program. It is important to note that all tactics are not equal. By that, I am referring to return on the co-op marketing dollars invested. There is a huge difference in the ROI of a logo pen versus a social media ad. In too many cases, co-op marketing is not utilized to its full advantage.
This may be traced back to a poor or inadequate program, or a lack of employing and deploying the program strategically in partnership with the integrator. At the top level it is about gaining attention and market share for manufacturers and their channel partners but at the program and effort assessment level it is about ROI for both sets of partners.
Suffice it to say that marketing continues to be an inexact science, but the good news is that it is getting better. Nineteenth century Philadelphia retailer John Wanamaker is famously quoted as saying “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.”
Many still tend to throw a lot of money at mass marketing and hope that some (or most) of it will stick. Wharton marketing professor Peter Fader has found a way beyond mass marketing to targeted marketing. His main conclusion is that a very small proportion of your current and potential customers account for a very large proportion of your profitability. So, relentlessly focus your marketing resources on those individuals.
Targeted marketing is where the manufacturer and integrator co-op marketing partnership aimed at the end users, can be successful. I must add that it only works if done right and measured appropriately for performance along the way.
The most basic way to calculate the ROI of a marketing campaign is to integrate it into the overall business plan calculation. You take the sales growth from that business or product line, subtract the marketing costs, and then divide by the marketing cost.
(Sales Growth – Marketing Cost) / Marketing Cost = ROI
The key in this calculation is that it must be done over a period of time, to get what might be called an annual ROI on a given program. Any single snapshot in time can be misleading, and not indicative of overall programmatic efficacy.
The point is that as time goes by, sales growth should follow, and the cumulative total ROI of the campaign will start to look better and be more a more accurate reflection of program efficacy.
Another issue to consider in the evaluation of all elements of ROI, is that ROI may partly relate to something other than pure sales increases. Positive ROI with quantitative sales numbers is great (read that as indisputable proof of performance), but another metric may come into play. This is return on objective (ROO). This is qualitative in nature (a soft metric) but can be equally as important as ROI itself. ROO can include things like brand awareness, social media likes and followers, etc.
I say, “can be important”. Keep in mind that these soft metrics, even brand building, are not justification on their own if the campaign itself is failing to drive sales growth over time. These qualitative benefits on their own should not be the core of a campaign because they cannot be accurately measured in dollars and cents.
This brings into play the famous MBA phrase, “If you can’t measure it, you can’t manage it.” I would add to that if you cannot properly manage it (program design and implementation), then success will be unlikely.
Measurement is critical for a manufacturer’s overall marketing program, but it is equally important to be able to measure and manage the co-op program as a stand-alone entity.
One marketing guru opined that “An advanced co-op fund management platform can provide insights and analytics down to the local level, empowering brands to understand how participants are spending their co-op funds and how their investments are performing. However, brands that are still managing their co-op marketing program with spreadsheets or outdated technology may have more difficulty accessing campaign performance analytics and may not know if partners are spending their funds at all.”
It is time to clear up a common misconception. Many people tend to mix up the terms market development funds (MDF) and co-op marketing (Co-op). The fact is that they are not synonymous or interchangeable. Keep in mind it may be either/or, but in many cases may be both. The biggest difference is that MDF funds are offered to channel partners before any sale has taken place, and co-op funds are given after sales have taken place.
MDF funds are commonly used as an enticement to kick off a new product or a new sales effort. Conversely, co-op funds are given to channel partners who have already sold your product to encourage them to further market on your behalf and sell more.
Market Development Funds (MDF) Defined:
MDF are funds are provided by manufacturers to select channel partners based on the objectives of the manufacturers and an assessment of the potential for success of participation by/with the partner.
The focus is increased sales, introduction of new products, and/or the desire to enter a new vertical market. The “vehicle” used to accomplish this is to provide additional marketing funds with a partner who has proven their expertise in sales promotion or one where the vendor sees potential for growth and future sales.
MDF funds are typically provided at the discretion of the manufacturer to select channel partners prior to any sales taking place and the dollar amount can vary from partner to partner. Specific sales and marketing plans are discussed before the funds are given and detailed reporting of results and leads are a requirement.
Co-op Marketing Funds Defined:
Co-op marketing funds are accrued as a percentage of prior sales. These funds are available to most, if not all channel partners, but the percentage of money received may increase or decrease based on sales achievement. The manufacturer often implements rules on how the funds can be used (i.e., tactics) and pre-approval must be received prior to conducting any marketing programs.
However, once the funds are received by the partner, they are then owned by the channel partner and cannot be taken away.
As noted, providing MDF vs. co-op funds does not have to be an either/or decision. Many manufacturers offer both. Typically, a manufacturer selects a small sub-set of channel partners with the largest sales potential, coupled with their ability (and desire) to participate in a proactive marketing program to receive MDF funds, and then they (as well as a larger group of channel partners) will receive co-op funds as a percentage of future sales.
At the conceptual level there are obvious benefits to co-op marketing programs and MDF funds for both manufacturers and their channel partners. Perhaps the biggest benefit for the manufacturer is the expansion of their marketing message overall and reaching targeted regional and local audiences that would be difficult (read that expensive) to do otherwise… and thus increased sales.
For the channel partners, they also want to increase sales, and part of achieving that goal is with a good co-op and MDF program… especially since they do not have to come up with the marketing strategy, create the marketing materials, or fund the execution entirely themselves.
The picture we have painted is very positive, with verifiable benefits for both the manufacturers and the channel partner. There appears to be no good reason for a co-op marketing program to fail, but often, many do. Industry analysts estimate that approximately 50% of co-op funds go unused each year.
When co-op programs fail, it is usually for one of five reasons:
1. The co-op program is poorly designed by the manufacturer as it relates to the channel partners, and as a result they are not actively engaged. The manufacturers simply do a copy-paste of other co-op programs they might be familiar with and put them in a document and hope for participation.
2. The channel partner cannot afford the upfront capital to place the advertisements. In this situation, they are usually a small business with limited cash flow. When a manufacturer asks a channel partner to extend themselves further it is often more than the channel partner can bear.
3. The manufacturer places too much of the creative burden on the channel partner. Channel partners typically do not have extensive marketing resources. If the partner has no ability to create ads the program will fail.
4. The reimbursement process is too administratively cumbersome. Manufacturers are typically larger companies with compliance considerations. This creates a need to have an auditable process around how the funds are approved and reimbursed. Many co-op programs are living in the stone ages when it comes to how the programs are administered. This delays the reimbursement to the channel partner and increases the cash flow burden.
5. The program is poorly managed, assessed, and administered on all ends. The program design might be fine but if it is left to grow on its own without oversight and some degree of continuous management and assessment, it will fail.
Co-op marketing best practices
To get the benefit and avoid the pitfalls of cooperative marketing programs we suggest the following best practices:
1. Coordinate co-op advertising with your broader marketing campaigns.
2. Make sure the rules around the use of co-op funds are simple and clear.
3. Make claims, reimbursement, and co-funding processes simple.
4. Provide preconfigured marketing programs to opt-in and spend their promotional dollars.
5. Create pre-approved ad templates that are easily customizable by your channel partners.
6. Assist partners in media buying.
7. Get in place an automated system for claiming available funds and requesting reimbursement.
8. Select a distributed marketing software program to automate the process.
I am certain we have all heard the adage about the “road to Hell is paved with good intentions”. The “good intentions” of co-op marketing and MDF funds are clear. They are intended to increase marketing outreach and brand awareness for manufacturers, and through the participation of channel partners, increase sales.
The problem comes in the execution part of the equation. The missing link so often is the care and feeding of the program both on the part of the manufacturer and channel partner. The fact is that most often these programs are treated as an afterthought and fall under the “out of sight, out of mind” conundrum. Of course, this begs the question of what to do.
We have provided some helpful hints and best practices above, but one that will significantly help in programmatic success is the selection and deployment of a distributed marketing software package. These packages automate the majority the process.
They can eliminate all the issues associated with manual co-op funding processes and incompatible systems. Today, leading distributed marketing platforms offer innovative solutions for all aspects of local channel partner marketing, including co-funding options, ad building, brand compliance, automated marketing execution and fulfillment and robust marketing analytics. It is important to find the right fit to meet the needs of both you as a manufacturer and your channel partner network.
Once you find the one that works for you, it automates the process. The management, operation, and assessment of the co-op and MDF programs become part of your daily, weekly, and monthly activities.
We know that distributed marketing works, and increased brand awareness and sales are the result. We also know that co-op and MDF programs (if properly created, implemented, and managed) work. Of course, it takes the proverbial two to tango to make it work. In the creation of the programs, it is imperative to create ones that will work within the realms (business practices) of your channel partners and avoid elements that are likely to negate success at the very outset.
This means a manufacturer needs to know their channel partners in depth, and not just know “of” them. One size certainly does not fit all in the manufacturer or integration communities, so programs need to be tailored to the participants. If the program and process is properly created followed by consistent attention and management then the probability of success becomes a logical and reasonable expectation.
Alan Brawn is the Principal of Brawn Consulting and is a veteran of the Pro AV integration industry.