How to Grow Media Sales with Market Development Funds and Co-​op Advertising Funds

You can increase media sales by helping your local accounts access vendor funding for their advertising campaigns. These financial resources come in the form of market development funds and co-​op ad funds. September is Co-​op Advertising Awareness Month, an AdMall-​sponsored event that serves as a reminder for media sellers to encourage local accounts to tap these funds for year-​end advertising campaigns.

What are market development funds?

Market development funds, commonly called MDF, are funds that manufacturers and other vendors make available to channel partners, dealers, distributors, resellers, or retailers to support marketing and sales activities.

The goal is straightforward: Vendors benefit when their partners successfully market and sell their products, so they provide funding to support activities that can create demand.

Depending on the vendor's program, MDF may help pay for digital advertising, events, direct marketing, content, promotions, sales enablement activities, or other approved initiatives.

MDF programs vary considerably. Vendors may allocate funds based on sales performance, partner tier, strategic priorities, geographic markets, or other criteria. Some programs require partners to submit a marketing plan and receive approval before spending the funds.

What is the difference between market development funds (MDF) and co-​op ad funds?

Although MDF and co-​op advertising funds both help businesses pay for marketing, the terms aren't necessarily interchangeable.

Market development funds are typically broader. MDF may support a range of activities designed to develop a market and generate demand. That could include advertising as well as events, campaigns, marketing materials, lead-​generation programs, or other initiatives.

Co-​op advertising funds are generally tied more directly to advertising. In a co-​op program, a vendor reimburses a partner for some or all of the cost of approved advertising that promotes the vendor's brand or products.

Both programs share the same basic idea: Vendors help fund marketing that benefits both businesses.

What is the process for using MDF and co-​op advertising funding?

While individual programs differ, using MDF or co-​op funds typically involves several basic steps.

Vendor establishes advertising funds

Vendors regularly update the details of their MD or co-​op advertising plans. Their dealers are not always aware of these updates. Media sellers can use a platform like AdMallto find out which vendors offer MDF or co-​op programs. Share this information with your local accounts so they can learn how much funding they’re eligible to use, and when those funds expire.

Retailer plans the campaign

Local retailers can plan ad campaigns based on new product releases or seasonality​.As they do so, media sellers can help them review the program requirements. This includes identifying eligible media, reimbursement percentages, branding requirements, minimum spending thresholds, campaign dates, and documentation requirements.

Campaign gets approved

Some vendors require their dealers to approve an ad campaign before it runs. In fact, ad cost reimbursement may depend on that approval. Vendors may also establish specific requirements for how their products, logos, trademarks, pricing, or promotional messages appear in an advertisement.

That's why approval matters. Don't assume an expense will qualify simply because it promotes the vendor. Dealers must review the program guidelines and, when required, obtain approval before committing advertising dollars. Media sellers should be sure their accounts follow the details of the plan.

Retailer submits proof of performance

After the ad campaigns completes, the dealer, with the media sales rep’s assistance, can gather details. Showing proof of performance is typically necessary before the dealer receives reimbursement.

Finally, give your accounts the data they need to submit their claim and proof of performance. You may need invoices, screenshots, copies of advertisements, performance reports, proof of payment, or other documentation demonstrating that the campaign ran as approved.

Vendor reimburses eligible costs

After submission of proof of performance, vendors will reimburse their dealers. Only eligible costs are reimbursed. And dealers should monitor deadlines throughout the process. Missing a preapproval or reimbursement deadline can mean losing funding that otherwise would have been available.

Who participates in cooperative advertising?

Vendors set aside money for MDF and cooperative advertising. Their retail partners and dealers can request ad cost reimbursement through these funds. Media sellers can help retailers understand the program guidelines and give them data that satisfies any proof of performance requirements.

How are co-​op advertising plans and market development funds structured?

Every vendor establishes its own eligibility requirements, but MDF and co-​op ad plans generally fall into one or more of the following categories.

Percentage-​based reimbursement

In a formal co-​op advertising plan, vendors will pay a specific percentage of a dealer’s cost. The vendors may set different levels of percentage reimbursement based on the volume of product purchased by a dealer.

For example, a business might run a $5,000 advertising campaign featuring a manufacturer's products. If the manufacturer's co-​op program covers 50% of qualifying costs, the business could potentially receive $2,500 in reimbursement, subject to the program's rules and available funds. 

Accruals

Often, dealers must buy a specific volume of products from a vendor to qualify for access to co-​op funds. These accruals can be measured in terms of a percent of the sale or as a fixed dollar amount during a set time period, such as one year.

Fixed advertising allowances

A vendor may also set a fixed dollar amount that a dealer can qualify for in terms of reimbursement. This fixed amount may be based on a calendar year, or it may be based on each product sold.

Negotiable co-​op advertising

Some vendors maintain a fund to be paid out to specific dealers to assist with advertising costs. The sales managers in each region manage the details and the access to the funds.

What types of advertising qualify for vendor reimbursement?

Every vendor establishes its own eligibility requirements, so there's no universal list of advertising that qualifies for MDF or co-​op reimbursement. Vendors maintain documents that specify what they will pay for. They also list the dates of the active program. And they advise their retailers on what should be included in a claim form and where to send in claims.

In some cases, vendors do not reimburse their dealers with money. They may offer the value of the earned co-​op credits in additional products.

Depending on the program, eligible media formats and dealer activities may include:

Digital advertising

Vendors typically specify the types of digital advertising that qualify for reimbursement. For example, some vendors may pay a fixed amount for website design, but they may not pay for mobile ad campaigns.

Social media advertising

Many vendors reimburse their dealers for the cost of paid social media ads. However, they may also require them to use pre-​approved suppliers for this activity. 

Print advertising

Coop advertising support for print ads remains strong in specific verticals. These verticals include apparel, jewelry and high-​value watches.

Television and radio advertising

As mass media outlets, TV and radio stations can benefit from co-​op advertising funding. Media sellers can show local dealers how to tap into vendor funding to run ad campaigns.

Email marketing

Many vendors will reimburse local dealers for some of the costs related to email campaigns. The specifics about reimbursement are located in the cooperative advertising funding plan.

Events and promotions

When a vendor runs a promotion, local dealers can use co-​op ad funds to buy advertising space. With a tool like AdMall, media sellers will know, on a weekly basis, which vendors are running promotions and which ones have co-​op advertising plans.

Benefits of cooperative advertising

Cooperative advertising can help vendors and retailers share marketing costs, expand reach, and create additional promotional opportunities. In addition, media sellers who understand how these plans work can increase their revenue by encouraging local accounts to use co-​op advertising funds.

Common challenges with cooperative advertising

Many cooperative advertising programs are underutilized. For retailers, this means leaving money on the table that could have been used to increase revenue. And vendors also miss out on establishing a bigger presence in the market when partners don’t access their co-​op ad funds.

Unused vendor funds

Industry experts believe that billions of co-​op ad funds and MDF go unused every year.

Complex approval process

One reason that co-​op ad funds remain untouched is approval complexity. Many small retailers do not have the time to figure out how to get their ad campaign approved by the right people at the vendor’s company.

Unclear program guidelines

In some cases, a vendor’s program guidelines are difficult to understand. A retailer may not know whether their recent streaming TV ad campaign would qualify for reimbursement.

Tracking and documentation problems

When local retailers are required to track and document the outcome of the ad campaigns, they may hesitate to proceed. It can be challenging to measure a campaign outcome when attribution details are not clear.

Missed reimbursement deadlines

Some vendors establish monthly or quarterly deadlines for their co-​op advertising plans and MDF. Busy local dealers may decide that keeping up with the deadlines is too much trouble.

Limited campaign flexibility

A dealer may hesitate to use co-​op ad funding because of the limited flexibility on the part of the vendor. For example, a dealer may not carry all the vendor’s products that would qualify for ad cost reimbursement.

Why is the end of the year important for using these funds?

Year-​end can be particularly important because some MDF and co-​op advertising programs operate on a "use it or lose it" basis.

Depending on the vendor, unused funds may expire at the end of a month, quarter, calendar year, or fiscal year rather than rolling over into the next period.

That makes the final months of the year a good time to review an advertiser's available balances.

If your accounts have unused funds, there may still be an opportunity to put them to work with an approved advertising campaign. And because many businesses are already planning their next year's marketing strategy, year-​end is also an ideal time to identify which vendors offer funding and incorporate those opportunities into upcoming campaigns.

Don't wait until the final days of the funding period, however. Campaign approvals, advertising schedules, proof-​of-​performance requirements, and reimbursement submissions can all take time.

How AdMall supports cooperative advertising

AdMall contains a human-​verified database on co-​op advertising and MDF for thousands of brands. With this information, media sellers can remind their accounts about available funds. Media sellers can review the plans with the highest reimbursement rates, and they can filter the data to determine which plans will be ending soon.

Final thoughts: Make every vendor dollar work harder

Media sellers should make MDF and co-​op funding part of their regular marketing conversations rather than something they bring up only at the end of the year. Monitoring AdMall’s weekly Media Sales Opportunities report to learn which vendors are running promotions that include co-​op advertising is a good first step. As AutoTrader reports, dealers shouldn’t let “ad dollars go to waste.” When local accounts advertise with the help of co-​op advertising, they sell more, and so do you. Read one media seller’s success story here.

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