Co-op vs. MDF Programs: Which One is Right For You?

In this article, we’re going to explain the differences between Co-op and MDF programs and help you choose which one is right for you.

Co-op MDF Programs Explained

Co-op and MDF programs are both joint advertising partnerships between manufacturers and their partners. Typically, manufacturers will give their partners money to reimburse ads showing both brands.

But Co-op and MDF programs are technically different.

A Co-op program is accrual-based. The amount of funds given depends on a partner’s level of sales. For example, imagine Walmart and Coke agree to a 3% accrual rate in their co-op partnership. If Walmart sells $1000 worth of Coke, then Coke will give Walmart $30 for their marketing efforts.

An MDF program, on the other hand, is fixed-cost. These are funds typically given in advance, and it doesn’t matter how much the partner sells. In the same example as earlier, Coke would give Walmart $30 instantly so they could use this in their marketing efforts

Why Choose Co-op Over MDF?

There are many reasons for and against choosing to give out Co-op funds instead of MDFs.

Some advantages of Co-op funds are that it’s simple for both parties to remember. It also encourages the partner to sell more. It can also help bolster channel loyalty and create a collaborative environment.

However, some disadvantages are that it can be difficult for accounting reasons. As Walmart sells more and more goods, Coke-Cola must set aside more and more funds to give them. There’s also the usual disadvantages that aren’t unique to co-op funds like low compliance, weak execution, and poor advertising. We’ll touch more upon how to deal with these problems later.

Why Choose MDF Over Co-op?

Like with Co-op funds, there are many reasons for and against choosing to give out MDFs instead of Co-op funds.

Some advantages of MDF funds are that they can massively boost the performance of a specific product/service rapidly. This has a few main use cases. Firstly, it can bring life to a struggling product line. Secondly, it can accelerate the results for a new product line (imagine Coke launches “Coke Ultimate” and wants it to succeed). Consider utilizing MDF funds if you fall into either of these categories.

The biggest disadvantage of MDF funds is also their biggest advantage. Sure, it’s a one and done investment based on projected revenue. But what if the partner wastes the money? In this way, it’s kind of like a baseball player stepping up to the plate – they’ll either hit the ball or miss it completely

How to Avoid Common Co-op MDF Marketing Mistakes

There are some common pitfalls that many Co-op MDF programs deal with and solutions on how to avoid them.

Mistake #1: Partners take too long to make good ads

When partners create their own local ad campaigns, the vendor is required to check it to make sure it’s good. This can lead to a lot of administrative work to verify brand compliance before reimbursement is given.

The solution is that brands can supply partners with plug-and-play templates to smoothen out this process. They can also provide a history of past ads that worked so partners can reference them. This would make everything quicker.

Mistake #2: It’s too complicated

Did you know that billions of Co-op MDF funds go wasted each year? One reason is because when partners want to get funds, it’s way too difficult and complicated. They’re lost in paperwork and bureaucracy.

The solution is that brands can simplify how their partners access Co-op MDF funds by offering an automated system like Computer Market Research’s Partner Portal.