Turn Marketing Dollars Into Guaranteed Sales
Revenue with a cooperative Market Development Program
Words To The Wise™
By David Lamont, Marketingsage
If your customers include resellers, distributors, OEMs, or other
business partners that buy and resell your product, you can turn
marketing dollars into guaranteed sales revenue with a co-cooperative
market development fund (MDF).
Under a cooperative market development program, marketing dollars
are awarded to your reseller customers so they can promote your
product and their company. A percentage of net sales revenue is
typically allocated to your reseller when they purchase a specified
amount of product. When the reseller promotes your product they
receive a rebate from their allocated market development funds.
Your reseller improves their bottom-line because the rebate reduces
their marketing costs and funds their own sales programs. Typically
these programs have rules that prohibit the resellers from using
the rebate to erode market pricing.
Unlike proprietary promotions, a co-operative market development
program guarantees a sales return on the marketing investment. The
market development fund rebate is paid on the net purchases by the
reseller. You have your revenue before you pay out. And the market
development funds earned by the reseller are only paid when they
run a qualifying promotion.
A very visible example of such a program is Intel’s “Intel
Inside” program. When Intel customers like Dell, HP, IBM,
Gateway and many others advertise they include the Intel jingle
and logo. These advertisements are funded in part by Intel through
a market development program.
The sales people benefit by being able to offer an incentive to
their reseller customer to meet certain purchasing targets –
their sales targets. Here is an example of the sales pitch: “If
you buy $100,000 worth of product by the end of the quarter you
qualify for a 5% marketing development fund rebate which you can
use to help sell the product through to your customers and to promote
your own business.”
By encouraging your reseller customers to stretch their purchases
so they can qualify for your market development program rebate,
you may also be shutting out your competitor. In most cases a reseller
will limit their total inventory. If your share of inventory goes
up from 50% to 60%, your competitor’s share falls to 40%.
Resellers generally focus on selling what they have in inventory.
The sales person also benefits by scheduling quarterly planning
meetings with their reseller customer to decide how the earned funds
will be spent. You can bet these plans will be sales centric, as
the reseller will be focused on selling the inventory through to
their customers. This meeting often opens up new selling opportunities
and helps strengthen relationships.
Marketing should consider funding such market development programs
when these programs are aligned with the awareness generating goals
they are tasked to achieve. By channeling promotional funds through
reseller customers in the form of a market development program,
marketing can significantly amplify its resources. By working with
resellers, marketing can generate more awareness and build brand
recognition faster. For every dollar you put into co-operative programs
you can get more than a dollar’s worth of promotions in return.
Marketing’s resources are amplified because the reseller
generally applies some of their own resources to the program. This
is especially the case if you require the reseller to match the
funding. For example, the company pays 50% of the promotion costs
and the reseller pays 50%. Even if your program does not require
the reseller or distributor to apply matching funds, the reseller
takes on the task of running the promotion. As the number of participating
resellers increases so will the number of promotions hitting the
market. Most marketing people are aware of the benefits of frequent
messages.
Furthermore, significant portions of the funds are never claimed.
In the author’s experience, unclaimed funds can be as high
as 50%. Most programs have a cut-off date for claims so unclaimed
funds can be reused to help generate new revenue and new promotions.
The goodwill these programs generate remains even when a reseller
does not claim all their funds.
By providing the reseller with artwork, promotional copy and sales
tools the marketing department maintains a significant amount of
influence over the message. You should also pre-approve all relevant
reseller promotions in advance and approve all market development
fund claims.
Market development programs and the tighter relationships they
foster with your reseller customer also create opportunities for
winning more press coverage. Not only can the program be announced
to the press but also the peer relationship that is built between
your marketing people and the reseller’s marketing people
often results in referrals that lead to new publicity opportunities.
In summary, marketing should consider funding
sales centric market development programs because these programs:
- Significantly amplify their resources to generate awareness
and build the brand. The Intel Inside program is a great example.
- Results are guaranteed so the spending can be justified in
a way that is not possible with proprietary promotions.
- Marketing maintains significant control over the marketing
message by providing the resellers with ready-to-use tools and
by managing the claim approval process.
- The program and resulting peer relationships provide opportunities
for additional press coverage.
About Marketingsage
Marketingsage is a full service marketing firm that helps other marketers and business executives increase revenue by cost-effectively generating sales leads, building brands, launching products and developing sales channels. With Marketingsage you can add expertise, bandwidth, specialized tools and contacts when you need them, for as long as you need them.
If you think Marketingsage may be able to help you and your business, please give us a call at 925-426-0488 or click here to have us contact you.
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