MDF & Co-op What Is Best Practice?

Transcription

1 MDF & Co-op What Is Best Practice?

2 CCI Provides Solutions to: Measure Optimize Manage channel sales & marketing programs

3 Incentive Solutions Throughout the Demand Chain Distributor Reseller Sales Reps Consumer Co-op/MDF Streamline management of joint marketing programs Marketing Planner Plan marketing programs, forecast and measure ROI SPIF & Rebates Run short- and long-term incentive programs Sales Performance Rewards Reward channel partners for attaining sales goals Trade In Rewards Manage incentive programs requiring physical return of goods Opportunity Management Deal Registration, Lead Management, Referral Rewards, and Special Pricing

4 CCI Clients

5 Complete Incentive Solutions Professional Services At Every Step Program Design Program Development Program Evolution Highly Configurable SaaS Application ROI Metrics Multi-currency/lingual Fund allocation New fund set up Approval workflows Partner and Activity add, deletes, changes alerts Program Management Available follow-the-sun support Claim administration Payments Program administration 7250 Redwood Blvd. Suite 105

6 Keystroke; a quick way to reboot re boot v. (reboot ) tr.v. re boot ed, re boot ing, re boots To restart. To turn off and then on again. To discard all previous programs and start anew. "I may have invented control-alt-delete, but Bill Gates made it really famous. David J. Bradley at a gathering at the twentieth anniversary of the IBM PC, whilst sitting next to Bill Gates.

7 Academic View Co-op, MDF What s the Difference? Co-op MDF Co-op programs are arrangements in which a manufacturer shares the cost of advertising with its resellers for featuring their brand of products. Both the manufacturer and the reseller get more advertising per dollar by sharing expenses. Co-op funds are accrued as a percentage of sales and offered to all eligible resellers. MARKETING EXPENSE Discretionary funds provided by manufacturers to their resellers that are offered to meet specific marketing objectives. MDF is generally negotiated by a company's sales force with their resellers to meet competitive offers, respond to other "vendor programs," or to target funds to a specific geographical area or product emphasis. Often require less complete proof of performance documentation than traditional co-op programs. CONTRA-REVENUE 7

8 What s Going On? Most vendors are funding MDF programs but are not reaping the benefits because a majority of the funds go unused. VARBusiness, % of Five Star caliber vendors offer MDF to partners. CMP Media Institute 25% of Vendor s MDF program dollars go unclaimed annually. AMR Research, 2001 Over $750 Billion is budgeted annually on trade promotions in the U.S. alone. $187 Billion left on the table!

9 Trends Impacting Programs Shift to investing in channels Return to channels Compliance Measurement Benchmarks

10 Trends Impacting Programs Shift to investing in channels Return to channels Compliance Measurement Benchmarks Maintain and extend channel partner relationships The product does not get to the enduser without the channel Leverage trade promotions budgets to achieve corporate objectives Understanding, targeting, and growing vertical markets Co-marketing effectiveness A move from traditional print and directmail methods to more effective comarketing efforts with vendors Channel influence on sales Direct interaction with end-users.

11 Trends Impacting Programs Shift to investing in channels Return to channels Compliance Measurement Address Federal Accounting Standards Board (FASB) Rules and Sarbanes-Oxley (SOX) compliance: Marketing expenses vs. contra revenue Verifiable internal controls Identification and classification of ALL expenditures Real time, proper accounting of all MDF/co-op payments Benchmarks

12 What Are the Issues? How did the likes of Enron and WorldCom change our world in channels? Enron and WorldCom misreported earnings to shareholders and engaged in purposeful and fraudulent activities to cover up their true financial conditions. Ahold claimed $880M in allowances they hadn t earned (mostly volume rebates). Many companies reported most trade allowances as marketing expenses. Moving to contra-revenue can cause significant sales decreases.

13 Sarbanes-Oxley Act (SOX) Key SOX Requirements: Sec 302 establish and maintain disclosure controls, and evaluate those controls and procedures within 90 days of filing. Sec 404 perform an annual assessment of the effectiveness of internal controls over financial reporting. Evaluate internal controls over financial reporting quarterly. Sec 409 Disclose to public on a rapid and current basis information concerning material changes to financial condition or results of operations. Sec 906 The period report containing financial information complies with the Exchange Act and fairly presents financial conditions and results of operations. Overall Control Objectives All reporting is accurate and free of material omission All matters that should be considered for disclosure are communicated to corporate executives in a complete and timely fashion. All transactions are captured, recorded, summarized and reported in accordance with GAAP and SEC rules. Assets are compared to accounting records.

14 Expense vs. Contra-revenue FASB Rule 01-9: Classification of Marketing Expenses (must meet all 4 tests): 1. The payment covers a service by the partner that offers a clear benefit to you; 2. The benefit is clearly separable from the sale of the product; 3. The benefit could be purchased by you from a source other than the partner; 4. You have obtained proof of performance to reasonably estimate true costs. Marketing Expenses Advertising (print/web) Broadcast (television/radio) Catalogs Direct mail/ enewsletters Seminars & Webinars Telemarketing Trade Shows Contra-Revenue Certification Training Demo equipment Sales incentives Funded Headcount Recruitment

15 Contra-revenue vs. Expense Contra Revenue vs. Expense Model Examples Example 1) Allowance granted: No POP req d 2) Reasonable claim: POP req d & submitted 3) Reasonable claim: POP req d but not submitted 4) Claim for $10K is reasonable 5) Claim for $10K is 2 times market value, but is still approved Contra Revenue Marketing Expense Re-classify Yes, from expense $5K $5K Yes

16 Trends Impacting Programs Shift to investing in channels Return to channels Compliance Quantifiable results Evaluate channel performance (top performing partners) Invest in marketing campaigns that yield quantifiable results and return-oninvestment Measurement Benchmarks Use of metrics Know what you want to measure Integrating ALL key data, including POS, forecasts, and MDF/co-op plans Reporting on key metrics (utilization, participation, media, vertical markets and products)

17 Key Indicators Program Indicators Total Funds USD $2,015, Total Expenditures USD $1,827, Outstanding USD $169, Utilization 90% Participation Indicators Total Active Accounts 591 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 Paid + Pending Budget Paid Pending Participation 83% Conformance Indicators Total Number of Claims Total Denied Claims 0% $0 MDF Balance Summary Spending by Activity Web Advertising (3.73%) Training (1.81%) Sales Tools (1.81%) Print Advertising (3.05%) Fund-Head Position (9.59%) Event/Seminar (9.86%) Direct Mail (0.09%) Catalog Advertising (70.06%)

18 Return on Investment Activity Type MDF Spend Total Audience Expected Return (ROI) Expected Sales # of Leads Catalog Advertising $201,792 22, % $800, Direct Mail $ % $1, Blast $600 14, % $5, Event/Seminar $45, % $12, Funded Head Count $50,000 5, % $1,800, Lead Generation $13,744 1, % $200, Print Advertising $35,845 40, % $125, Sales Tools $7, % $15, Telemarketing $2,400 1, % $15, Training $5, % $5,000 3 Web Advertising $26,333 20,502 30% $8,000 8 Totals for Q1 $389,877 $104, % $2,987,500 1,454

19 Media Usage Distributor Media Usage Profile POP / Specialty Items Miscellaneous Disti Staffing Disti Seminar/Training Disti Sales Promotions Disti Program Fees Disti Event/Show Direct Mail Reseller Seminar/Training Reseller Promotions Reseller Pass Thru Reseller Event/Show Communications (Dir. Mail, ) Collateral Advertising (print/web) Reseller Focus Top Usage: Fund Headcount = 20% Dir. Mail/ = 13% Print/Web Adv. = 13% Disti Sales Promos = 13% Disti Events/Shows = 8% 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 16.00% 18.00% 20.00%

20 Media Usage Reseller Media Usage Profile (top 15 categories) Magazine Print Ads Dedicated Head Count Incentive Programs Banners/Billboards/Poster Seminars Promotional Items Training Direct Mail Campaigns Magazine/Trade or Journal Conference/Show Attendance Demo Equipment Telemarketing/Lead Generation Sales Meetings Trade Show/Conferences Customer Events Top 5 Usage: Customer Events = 18% Trade Show/Conf. = 9.5% Sales Meeting = 7.6% Telemarketing = 6.6% Demo Equip. = 6.3% 48.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0%

21 Trends Impacting Programs Shift to investing in channels Return to channels Compliance Measurement Benchmarks Program indicators Funds accrued Funds expired Outstanding liability Utilization rates 1 st year: 40% 2 nd year: 60% 3+ years: 80% 50/50 Reimbursement Accrual rates 100% Range from 1% to 6% 66% of programs are between 2% and 3%

22 Operational Benchmarks Usage: Period 1 Period 2 Partners Using Site 1,541 1,976 Total Hits to Site 15,356 29,505 Prior Approvals: Total Pre-approvals Submitted 4,038 7,309 Total Pre-approvals Accepted (65%) 5,995 (82%) Total Denied 847 (21%) 803 (11%) Total on Hold Currently 422 (6%) 7 (< 1%) Turnaround on Ads 24 to 48 hrs 12 to 24 hrs Claims: Total Claims Submitted 2,142 4,772 Total Calls to Channel Management 10 to 30 per day 10 to 20 Response Time on Calls 24 hrs max 12 to 14 hrs Total s to Channel Management 10 to 20 per day 10 to 15 Response Time on s 24 hrs max 24 hrs max

23 What the Channel Tells Us MDF is critical to our business. It is the sole means of getting monetary resources for the marketing initiatives at our company. Critical (31%) Helpful (19%) Important (50%) Best uses: Off set marketing costs Training Funded headcount Direct mail / eblasts Seminars Demo equipment Reseller promotions Customer training opportunities Exhibit assistance Collateral material

24 What the Channel Tells Us Vendors biggest mistakes: Difficult, complicated, unclear or overly restrictive guidelines. Too much control over how the funds are used. Failure to effectively distribute/communication the program terms and conditions. Cumbersome, lengthy claims process and procedures. Poor or inadequate follow up on requests. Lack of access to available funds, historical data and reports. Failure to target the right customer with the funds.

25 Key success factors #1 Flexibility. One size does not fit all. What We Should Do About It Clear, concise accessible guidelines (kept it simple and sales friendly). Provide online access to available funds and historical usage sales data. Provide more input from the channel rep during fund usage decisions and marketing material creation. Timely follow up and communications on requests for MDF. Remove the administrative burden. Share vendor s corporate initiatives and how this will help. Make the program and other sales support tools functionally available.

26 Best Practices Guidelines Clear, concise accessible guidelines (keep it simple and sales friendly). Program Guide Quick Reference Chart & FAQs Documentation Requirements Training Contact Information

27 Most plans have similar characteristics which include: Products covered Timing limitations Level of reimbursement Media allowed Prior approval and claim requirements Method of reimbursement Proof-of-performance requirements Where to send claims Program Guidelines

28 Reference Charts and FAQs

29 Training Video Online Training Sessions Regional Sales Meeting Partner Summits

30 Best Practice Access Provide online access to available funds and historical usage sales data. Account Summary Claim Status Media Usage

31 Best Practice Communications Provide more input from the channel reps and provide timely follow up and communications. Marketing Plans Marketing & Sales Activities Pre- Approval Claim Pre- Approval Claim Pre- Approval Claim Account manager initiates the quarterly marketing plan: Strategic initiative Product emphasis Expected results Time period Total estimated MDF Partner enter activities to support the quarterly marketing plan: Activity: Catalogue Activity Name: Annual Catalogue Start/End Date: 06/01/04-08/31/04 Comments: total cost split over 4 product groups Total Estimated Cost: $2, Amount Requested: $2, Product: All Products

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33 Capture Data Points

34 Best Practice Sales Tools Make the program and other sales support tools functionally available. Leverage corporate materials and collateral for co-branding by your channel Product Sales Literature Case Stories Seminars in-a-box Direct Mailers HTML templates

35 Co-Branding Your look and feel and branding Select product imagery and associated text Allow the partner to add their own personal story Partner designation, company logo and contact information

36 Key Take-Aways Compliance MDF and co-op are inherently financial in nature and must be compliant. Know what accounting model your company follows. Contra-revenue vs. marketing expense. Program measurement Clearly define what you need to measure. Capture and report on the data. Set up simple ways to gather and analyze information. Use the data to determine wise investments in marketing campaigns that yield quantifiable results.

37 Key Take-Aways Listen to your channel partners Be flexible. Keep the program simple and friendly. Make the program is functionally available. Share knowledge about what works. Provide timely communications and follow up. Help your partner understand your corporate initiates and how this will help them. Eliminate manual and paper processes.

38 Key Take-Aways Communicate Communication must be consistent and must take place regularly. Communication reinforces buy-in and trust. Communication fosters an environment that allows for the free exchange of feedback, information and ideas.

39 Questions? CCI: Channel Marketing Solutions channelmanagement.com