Co-op Marketing Funds vs MDF: How Each Works and Which One Pays for Pipeline

Short answer: Co-op marketing funds are earned. A vendor accrues a share of what a partner sells, then reimburses the partner’s own marketing after the fact. Market development funds (MDF) are discretionary. A vendor sets the money aside, and partners propose activities that get approved before anything is spent. Both carry deadlines and proof-of-performance rules. If you want partners to fund pipeline, MDF is usually the lever, and the pitch is a program with a cost per SQO.

What is co-op marketing?

Co-op marketing is marketing that a vendor and a partner pay for together. The money behind it is usually called co-op funds, or cooperative marketing funds. In older retail language it’s coop advertising. The idea is the same in each case. A partner sells the vendor’s product, earns a pot of money from those sales, and spends it promoting the vendor.

Here’s the key word: earned. Co-op funds accrue. In most programs, the more a partner sells, the more co-op it gets.

Microsoft is a clean example. According to Microsoft’s Partner Center co-op claims page, co-op funds are earned through Microsoft Incentive Programs. Microsoft splits eligible earnings by percentage, for example 60% rebate and 40% co-op. Partners accrue co-op over a six-month earning period. Then they must use it in the following six-month usage period.

What are market development funds (MDF)?

Market development funds are a budget a vendor sets aside to grow a market with its partners. They aren’t tied to what a partner already sold. Instead, the partner (or the vendor) proposes an activity, and someone approves it.

And notice the name. The M in MDF is market, not marketing. People call it “marketing development funds” all the time. That’s wrong, and it matters, because the money exists to develop a market. A joint outbound campaign develops a market as much as a trade show booth does.

For example, AWS describes its MDF as funds that “help offset your marketing costs to drive demand generation and build your sales pipeline.” AWS partners can receive cash or AWS Promotional Credits. They request it through AWS Partner Central, and they need an AWS Payee Central account to do it.

Co-op funds vs MDF: what’s the difference?

Both pay for demand. They just get there differently.

	Co-op funds	MDF
How it’s created	Accrues as a share of the partner’s sales	Set aside by the vendor as a discretionary budget
Who decides how it’s spent	The partner, within the vendor’s rules	The vendor approves each proposed activity
When it’s checked	Usually at claim time, though some programs pre-approve	Usually before the activity, from a plan
How it pays out	Reimbursement of the partner’s spend	Reimbursement, prepayment or credits, depending on the program
What it usually funds	Ads and promotion that feature the vendor’s brand	Campaigns, events and programs that open new markets
What it rewards	Past sales	Future pipeline

In short, co-op rewards past sales. MDF bets on future pipeline. That’s why I treat them as two different conversations.

Which one fits your situation?

Co-op fits partners with steady, high-volume sales who want a predictable budget for ongoing promotion. MDF fits new markets, new products and partners who can reach buyers before the sales show up. If your goal is pipeline you can measure, go after MDF. The money exists to develop markets, and that’s exactly what pipeline work does.

Who funds co-op marketing and MDF?

In the classic channel model, the vendor funds both. A software or hardware company pays its partners to market its products. Think resellers, distributors, integrators, and the list goes on. Co-op comes out of a sales-linked accrual. MDF comes out of a channel or partner marketing budget.

But in B2B SaaS the direction often flips. Your partners have MDF too, and many of them want to go to market with you. A large platform or a GSI has a brand that smaller partners want their name next to. So they will pay to run programs with you, as long as there’s a strong reason for them to do it. That’s why funding belongs in your plan for partner marketing from the start.

That’s the MDF conversation most partner teams never have. They wait for budget from their own company. Meanwhile, the budget is sitting with their partners. MDF is my favorite budget on the planet, because there’s so much of it and so few partner teams ask.

How do claims and proof of performance work?

Every program has its own rules. Still, the shape is the same: get approval or spend, run the activity, then prove it happened.

How co-op claims work

With co-op, the claim is the main event. The partner runs the marketing, pays the bills, then submits a claim for reimbursement. Microsoft’s claims guidance covers invoices, statements and proof of execution for each claim. It also says to keep original documents for 24 months after the activity date, because Microsoft can ask for them.

Timing is strict. In Microsoft’s model, there’s an earning period, a usage period and a claiming period, each six months long. If you don’t use your earnings by the end of the usage period, you forfeit them.

How MDF claims work

MDF adds a step up front: approval. For instance, AWS fund requests move through stages such as AWS Review, Business Approval and Finance Approval, per the AWS Partner Central fund request guide.

Cisco’s FY23 Marketing Velocity Funds toolkit shows how detailed this gets. In that program, partners had to:

1. Submit the activity early. Requests were due at least five days before the start date and had to be approved first.
2. Prove execution. Claims needed proof of performance, proof of cost and proof of Cisco representation.
3. Hand over leads. Demand generation activities also required the leads, or metrics such as attendees when leads weren’t available.
4. Claim on time. Claims were due within 30 days after the fund period ended, and claims still open after the final deadline were refused and the funds forfeited.

So proof of performance usually means three things. Did it happen, what did it cost, and what did it produce? Programs change every fiscal year, so check your current guide before you plan.

What do co-op funds and MDF typically pay for?

Co-op tends to fund promotion that carries the vendor’s name:

• Digital and print ads featuring the vendor’s product
• Paid search and paid social
• Email campaigns to the partner’s customer base
• Collateral and co-branded content

MDF tends to fund activity that opens a market:

• Joint webinars and field events
• Partner dinners, roadshows and conference activation
• Outbound campaigns into named accounts
• Co-sell programs that produce sales-qualified opportunities (SQOs)

The real difference is the question the vendor asks. Co-op asks “did you promote us?” MDF asks “what did this develop?” If you want a refresher on where co-sell ends and co-marketing begins, here’s how we split co-sell vs co-marketing.

How do you request co-op funds or MDF?

The steps differ by vendor, but they rhyme.

For co-op funds:

1. Confirm your balance. Find out what you’ve accrued and when it expires.
2. Check the rules. Read what activities and brand use qualify.
3. Run the activity. Spend inside the usage window.
4. File the claim. Submit invoices and proof of execution before the claim deadline.

For MDF:

1. Find the owner. Ask who holds MDF at the vendor or partner. It’s often the partner marketing manager, and sometimes sales. Skip the acronym at first. Ask whether any partners give them money to run events or go to market together.
2. Write a short plan. Name the accounts, the activity, the cost and the expected SQOs. A one-page plan or a short deck is often enough.
3. Get approval first. Don’t spend a dollar until it’s approved.
4. Run it and track it. Capture leads, meetings and opportunities as you go.
5. Prove it and claim it. Submit proof of performance on time.

Then do the step most people skip. Bring the results back and ask for more next quarter. Agree on that before you start.

Why do use-it-or-lose-it budgets go unspent?

Here’s the irony. MDF is meant to be spent. Nobody gets promoted for saving it. If you hand back unspent MDF at year end, expect a slap on the wrist. Your boss will ask why you didn’t open the market they funded.

Yet plenty of it goes unused, for boring reasons:

• No plan when the window opens. The money lands, and nobody has a ready program to point it at.
• Nobody knows how to get it. Partner teams often don’t know how to access MDF, and proof of performance, proof of cost and claim deadlines feel like a second job.
• Nobody owns the work. Partner managers are in the relationship business. Lists, calls and follow-up aren’t their job.
• Nobody can show the result. MDF is a big budget with a measurement problem. It gets spent ad hoc, with no line to revenue.
• The deadline is too short. By the time a campaign is designed, the quarter is over.

That last one is why Q4 matters. A lot of partner MDF expires this quarter. If you design GTM motions now, they can be funded and ready to run in Q1. And if you hold leftover MDF of your own, we can turn it into GTM credits. Those run $1 for $1, are good for a year, and apply to motions at prices everyone sees. Just confirm your own program’s terms first, because many funders require the work to be delivered in the same quarter the MDF is spent. Also, most MDF ends up in field marketing events, and few teams can show what those events produced. If events are your plan, tie them to pipeline with partner field marketing that’s measured on SQOs.

How do partners fund programs that generate SQOs?

Partners fund programs, not tools. If you ask a partner to pay for your software, they’ll say no. But ask them to put $50,000 into a program that produces a set number of SQOs with you, and the answer changes.

Pitch the program, not the line item

Big companies fund programs. When one produces, they rarely care how every dollar was spent. They want a basic plan and the pipeline. So lead with the outcome:

1. The accounts. Which shared targets you’ll go after together.
2. The motion. What runs, on which channels, under whose name.
3. The math. What it costs and how many SQOs it should produce.
4. The proof. How both sides will see activity and results as they happen.

Win on cost per SQO

Every dollar of MDF competes on one number: cost per SQO. Joint programs with partners often produce SQOs cheaper than anything else in the company. Once leadership sees that number, more MDF tends to follow. Here’s how to prove MDF ROI before the next budget cycle.

Credit matters too. If your SDR team books it, it isn’t partner-sourced. Run with the partner, it counts. Here’s more on partner-sourced vs partner-influenced pipeline.

Split the cost

Partners can fund all of a program or split it. For example, a lead partner and the platform might each cover a share, with smaller partners riding along for less. The platform can also collect the funds itself and pay per motion.

That’s the work we do. Our Partner-Sourced Pipeline program runs funded GTM motions with your partners, in their name. That means email, LinkedIn and cold calls from a real human SDR, plus field marketing and in-person events when the motion calls for them. It starts from $50,000 a quarter, and a single GTM motion plans at about $12,500. Programs are often funded by partners through MDF, so it could cost you $0. Our MDF guide walks through the full lifecycle, from request to proof of performance.

Related reading

• B2B SaaS Marketing Partner: What It Is and How
• Channel Partner Marketing: What It Is and How It Works
• Event-Driven vs Always-On Partner Marketing
• How to Report Partner Pipeline to the Board: The Slide That Works
• Nearbound Marketing: What It Is and How It Works

Frequently asked questions

Is co-op marketing the same as MDF?

No. Co-op funds are usually earned from a partner’s sales and reimburse the partner’s own marketing. MDF is a discretionary budget, approved per activity, meant to develop a market.

What happens to unused co-op funds?

In many programs, they expire. Microsoft, for example, says partners forfeit co-op earnings not used by the end of the usage period.

What counts as proof of performance?

Usually proof that the activity happened, proof of what it cost, and for demand generation, the leads it produced. Each vendor publishes its own list, so check the current program guide.

Can MDF pay for co-sell programs?

Often, yes. MDF exists to develop markets, and a co-sell program that produces SQOs does exactly that. Pitch it with a cost per SQO, and confirm the activity qualifies under the vendor’s rules.

The bottom line

Co-op marketing rewards what a partner already sold. MDF funds what you plan to build next. Both expire, and both need proof. So find out which of your partners has MDF right now, and bring them a program that produces SQOs. If you need a hand running it, we’re a B2B partnerships agency built for exactly this.

Forecastable is an independent third-party professional services company. Program details for Microsoft, AWS and Cisco are drawn from each company’s public pages and were last checked on November 8th, 2026.

Want to know how much of your next GTM motion your partners could fund? Book a Program-Fit Analysis