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Maximising your Microsoft Co-op: A guide for IT Service Providers

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As we approach the beginning of FY25, you may be starting to think about those H1 co-op funds accrued and becoming available. Often referred to as “Microsoft dollars” or MDF (Market Development Funds), these funds are vital for driving growth and maximising return on investment (ROI) from your engagements. But do you know how you earned them and how best to use them?

Co-op in simple terms

Co-op, or co-op marketing funds, are essentially a reward system from Microsoft based on the sales of certain products. These funds are accrued based on a percentage of the Recommended Retail Price (RRP) of those products. For example if you sold a SKU at $100 per month for a commitment of 12 months, and the incentive rate were to be 10%, with a rebate (cash incentive) of 60% and co-op (marketing funds) accrued at 40%. You would have accrued $36 dollars in rebate, and $24 in co-op funds for that 6 month earning period.

In layman’s terms, co-op funds are a way for Microsoft to support your marketing efforts, allowing you to reinvest in activities that can drive more sales and engagement.

How to accrue Co-op funds

Co-op funds are earned through your sales activities. Here’s a simple breakdown:

  1. Sell Microsoft products: Each eligible SKU sold contributes to your co-op fund.
  2. Incentive return: A percentage of the sale price is calculated as your incentive return.
  3. Co-op allocation: A portion of the incentive return is allocated to your co-op fund.

Utilising your Co-op funds

Now that you understand how co-op funds are accrued, let’s discuss how to maximise their ROI. It’s tempting to spend these funds on quick-win activities like email direct marketing (EDM) campaigns, but strategic planning can yield better results.

Imagine you plan an EDM campaign costing $6,000. Using the example above, to fund this with co-op, you would have to of had generated at least $150,000 in revenue from the sale of that product. The key to maximising ROI is not just in spending the co-op funds but in ensuring that the spending leads to increased sales velocity and further accrual of funds.

Maximising ROI from Co-op funds

To get the most out of your co-op funds, consider the following strategies:

Know your incentives and playbooks: Ensure your team is familiar with Microsoft’s incentive guides and co-op playbooks. These resources provide valuable information on how to leverage co-op funds effectively.

Use the CSP incentive calculator: This tool helps you model the total front-end and backend margins for each deal, including co-op. By understanding the financial implications, you can better plan your marketing activities.

Target high ROI activities: Focus on marketing efforts that have proven to generate high returns. This could be digital marketing campaigns, webinars, or targeted advertising.

Leverage accelerators: Use co-op funds to increase the velocity of SKU sales through accelerators, which can provide additional incentives for selling specific products.

Monitor and adjust: Continuously monitor the performance of your marketing activities. Use the insights gained to adjust your strategies and ensure you are maximising the ROI from your co-op funds.

Consulting for Co-op optimisation

At Xeneth, in combination with our marketing partner Inception Marketing, we understand the complexities of managing co-op funds and maximising ROI. Our consulting services are designed to help you navigate the intricacies of Microsoft CSP co-op, providing tailored strategies to boost your marketing efforts and sales performance. By working with us, you can ensure that your co-op funds are used effectively, driving growth and profitability.

Maximising your Microsoft co-op funds is about more than just understanding how they are accrued. It involves strategic planning, knowledge of incentives, and targeted marketing activities. By following the steps outlined above and leveraging our consulting services, you can make the most of your co-op funds, driving significant ROI and growth for your business.

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