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MDF & Co-op What Is Best Practice?
www.channelmanagement.com [email protected]
7250 Redwood Blvd. Suite 214 Novato, CA 94945 Phone 415.427.5100
channel sales & marketing programs
CCI Provides Solutions to:
Manage
Measure Optimize
www.channelmanagement.com [email protected]
7250 Redwood Blvd. Suite 214 Novato, CA 94945 Phone 415.427.5100
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
www.channelmanagement.com [email protected]
7250 Redwood Blvd. Suite 214 Novato, CA 94945 Phone 415.427.5100
CCI Clients
www.channelmanagement.com [email protected]
7250 Redwood Blvd. Suite 105 Novato, CA 94945 Phone 415.427.5100
Professional Services At Every Step
Program Design
Program Development
Program Evolution
Complete Incentive Solutions
Highly Configurable SaaS Application
ROI Metrics
Multi-currency/lingual
Fund allocation
New fund set up
Approval workflows
Partner and Activity –
add, deletes, changes
Email alerts
Program Management
Available follow-the-sun support
Claim administration
Payments
Program administration
www.channelmanagement.com [email protected]
7250 Redwood Blvd. Suite 214 Novato, CA 94945 Phone 415.427.5100
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.
www.channelmanagement.com [email protected]
7250 Redwood Blvd. Suite 214 Novato, CA 94945 Phone 415.427.5100
Academic View
7
Co-op, MDF – What’s the Difference?
MARKETING EXPENSE CONTRA-REVENUE
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.
Co-op 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.
MDF
www.channelmanagement.com [email protected]
7250 Redwood Blvd. Suite 214 Novato, CA 94945 Phone 415.427.5100
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, 2004
• 98% 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!
www.channelmanagement.com [email protected]
7250 Redwood Blvd. Suite 214 Novato, CA 94945 Phone 415.427.5100
Trends Impacting Programs
Shift to investing in channels
• Return to channels
• Compliance
• Measurement
• Benchmarks
www.channelmanagement.com [email protected]
7250 Redwood Blvd. Suite 214 Novato, CA 94945 Phone 415.427.5100
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 end-
user 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 direct-
mail methods to more effective co-marketing efforts with vendors
Channel influence on sales Direct interaction with end-users.
www.channelmanagement.com [email protected]
7250 Redwood Blvd. Suite 214 Novato, CA 94945 Phone 415.427.5100
Trends Impacting Programs
Shift to investing in channels
– Return to channels
– Compliance
– Measurement
– Benchmarks
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
www.channelmanagement.com [email protected]
7250 Redwood Blvd. Suite 214 Novato, CA 94945 Phone 415.427.5100
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.
www.channelmanagement.com [email protected]
7250 Redwood Blvd. Suite 214 Novato, CA 94945 Phone 415.427.5100
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.
www.channelmanagement.com [email protected]
7250 Redwood Blvd. Suite 214 Novato, CA 94945 Phone 415.427.5100
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/e-mail • eNewsletters • Seminars & Webinars • Telemarketing • Trade Shows
Contra-Revenue
• Certification • Training • Demo equipment • Sales incentives • Funded Headcount • Recruitment
www.channelmanagement.com [email protected]
7250 Redwood Blvd. Suite 214 Novato, CA 94945 Phone 415.427.5100
Contra-revenue vs. Expense
Example Contra Revenue
Marketing Expense
Re-classify
1) Allowance granted: No POP req’d 2) Reasonable claim: POP req’d &
submitted 3) Reasonable claim: POP req’d but not
submitted Yes, from expense
4) Claim for $10K is reasonable 5) Claim for $10K is 2 times market value,
but is still approved $5K $5K Yes
Contra Revenue vs. Expense Model Examples
www.channelmanagement.com [email protected]
7250 Redwood Blvd. Suite 214 Novato, CA 94945 Phone 415.427.5100
Trends Impacting Programs
Shift to investing in channels
– Return to channels
– Compliance
– Measurement
– Benchmarks
Quantifiable results
Evaluate channel performance (top performing partners)
Invest in marketing campaigns that yield quantifiable results and return-on-investment
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)
www.channelmanagement.com [email protected]
7250 Redwood Blvd. Suite 214 Novato, CA 94945 Phone 415.427.5100
Key Indicators
$0
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
MDF Balance Summary
Paid + Pending
Budget
Paid
Pending
Program Indicators
Total Funds USD $2,015,849.43
Total Expenditures USD $1,827,986.09
Outstanding USD $169,644.28
Utilization 90%
Participation Indicators
Total Active Accounts 591
Participation 83%
Conformance Indicators
Total Number of Claims 21336
Total Denied Claims 0% 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%)
www.channelmanagement.com [email protected]
7250 Redwood Blvd. Suite 214 Novato, CA 94945 Phone 415.427.5100
Return on Investment
Activity Type MDF Spend Total Audience Expected Return (ROI)
Expected Sales # of Leads
Catalog Advertising $201,792 22,000 396% $800,000 500
Direct Mail $250 157 600% $1,500 5
Email Blast $600 14,000 917% $5,500 70
Event/Seminar $45,970 195 27% $12,500 83
Funded Head Count $50,000 5,000 3600% $1,800,000 500
Lead Generation $13,744 1,000 1455% $200,000 20
Print Advertising $35,845 40,000 349% $125,000 125
Sales Tools $7,558 170 198% $15,000 100
Telemarketing $2,400 1,300 625% $15,000 40
Training $5,385 200 93% $5,000 3
Web Advertising $26,333 20,502 30% $8,000 8
Totals for Q1 $389,877 $104,524 766% $2,987,500 1,454
www.channelmanagement.com [email protected]
7250 Redwood Blvd. Suite 214 Novato, CA 94945 Phone 415.427.5100
Media Usage
0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 16.00% 18.00% 20.00%
Advertising (print/web)
Collateral
Communications (Dir. Mail, Email)
Reseller Event/Show
Reseller Pass Thru
Reseller Promotions
Reseller Seminar/Training
Direct Mail
Disti Event/Show
Disti Program Fees
Disti Sales Promotions
Disti Seminar/Training
Disti Staffing
Miscellaneous
POP / Specialty Items
Distributor Media Usage Profile
Reseller Focus
Top Usage: Fund Headcount = 20% Dir. Mail/E-mail = 13% Print/Web Adv. = 13% Disti Sales Promos = 13% Disti Events/Shows = 8%
www.channelmanagement.com [email protected]
7250 Redwood Blvd. Suite 214 Novato, CA 94945 Phone 415.427.5100
Media Usage
0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0%
Customer Events Trade Show/Conferences
Sales Meetings Telemarketing/Lead Generation
Demo Equipment Conference/Show Attendance
Magazine/Trade or Journal Direct Mail Campaigns
Training Promotional Items
Seminars Banners/Billboards/Poster
Incentive Programs Dedicated Head Count
Magazine Print Ads
Reseller Media Usage Profile (top 15 categories)
Top 5 Usage: Customer Events = 18% Trade Show/Conf. = 9.5% Sales Meeting = 7.6% Telemarketing = 6.6% Demo Equip. = 6.3% 48.0%
www.channelmanagement.com [email protected]
7250 Redwood Blvd. Suite 214 Novato, CA 94945 Phone 415.427.5100
Trends Impacting Programs
Shift to investing in channels
– Return to channels
– Compliance
– Measurement
– Benchmarks
Program indicators
Funds accrued
Funds expired
Outstanding liability
Utilization rates
1st year: 40%
2nd year: 60%
3+ years: 80%
Accrual rates
Range from 1% to 6% 66% of programs are between 2% and 3%
50/50
Reimbursement
100%
www.channelmanagement.com [email protected]
7250 Redwood Blvd. Suite 214 Novato, CA 94945 Phone 415.427.5100
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 2.625 (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 e-mails to Channel Management 10 to 20 per day 10 to 15 Response Time on e-mails 24 hrs max 24 hrs max
www.channelmanagement.com [email protected]
7250 Redwood Blvd. Suite 214 Novato, CA 94945 Phone 415.427.5100
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.”
Best uses:
Off set marketing costs
Training
Funded headcount
Direct mail / eBlasts
Seminars
Demo equipment
Reseller promotions
Customer training opportunities
Exhibit assistance
Collateral material
Critical (31%)
Helpful (19%)
Important (50%)
www.channelmanagement.com [email protected]
7250 Redwood Blvd. Suite 214 Novato, CA 94945 Phone 415.427.5100
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.
www.channelmanagement.com [email protected]
7250 Redwood Blvd. Suite 214 Novato, CA 94945 Phone 415.427.5100
What We Should Do About It
Key success factors #1 Flexibility. One size does not fit all.
• 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.
www.channelmanagement.com [email protected]
7250 Redwood Blvd. Suite 214 Novato, CA 94945 Phone 415.427.5100
Best Practices
Clear, concise accessible guidelines (keep it simple and sales friendly).
• Program Guide
• Quick Reference Chart & FAQs
• Documentation Requirements
• Training
• Contact Information
Guidelines
www.channelmanagement.com [email protected]
7250 Redwood Blvd. Suite 214 Novato, CA 94945 Phone 415.427.5100
Program Guidelines
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
www.channelmanagement.com [email protected]
7250 Redwood Blvd. Suite 214 Novato, CA 94945 Phone 415.427.5100
Reference Charts and FAQs
www.channelmanagement.com [email protected]
7250 Redwood Blvd. Suite 214 Novato, CA 94945 Phone 415.427.5100
Training Video
Online Training Sessions
Regional Sales Meeting Partner Summits
www.channelmanagement.com [email protected]
7250 Redwood Blvd. Suite 214 Novato, CA 94945 Phone 415.427.5100
Best Practice
Access Provide online access to available funds and historical usage sales data.
Account Summary
Claim Status Media Usage
www.channelmanagement.com [email protected]
7250 Redwood Blvd. Suite 214 Novato, CA 94945 Phone 415.427.5100
Best Practice
Communications Provide more input from the channel reps and provide timely follow up and communications.
Marketing Plans
Marketing & Sales Activities
Pre- Approval
Pre- Approval
Pre- Approval
Claim Claim 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: $2,208.27 • Amount Requested: $2,208.27 • Product: All Products
www.channelmanagement.com [email protected]
7250 Redwood Blvd. Suite 214 Novato, CA 94945 Phone 415.427.5100
www.channelmanagement.com [email protected]
7250 Redwood Blvd. Suite 214 Novato, CA 94945 Phone 415.427.5100
Capture Data Points
www.channelmanagement.com [email protected]
7250 Redwood Blvd. Suite 214 Novato, CA 94945 Phone 415.427.5100
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 e-mail templates
www.channelmanagement.com [email protected]
7250 Redwood Blvd. Suite 214 Novato, CA 94945 Phone 415.427.5100
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
www.channelmanagement.com [email protected]
7250 Redwood Blvd. Suite 214 Novato, CA 94945 Phone 415.427.5100
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.
www.channelmanagement.com [email protected]
7250 Redwood Blvd. Suite 214 Novato, CA 94945 Phone 415.427.5100
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.
www.channelmanagement.com [email protected]
7250 Redwood Blvd. Suite 214 Novato, CA 94945 Phone 415.427.5100
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.
www.channelmanagement.com [email protected]
7250 Redwood Blvd. Suite 214 Novato, CA 94945 Phone 415.427.5100
Questions?
CCI: Channel Marketing Solutions channelmanagement.com [email protected] 415.427.5100