Reynolds is considering a transition from off-invoice allowances to Marketing Development Funds (MDF) in order to efficiently implement category management. Category management is an industry-wide initiative designed to improve the effectiveness of marketing dollars through efficient promotion, distribution and shelf replenishment, product assortment and new-product introduction. Off-invoicing offers per case discounts to distributors and remains a standard marketing practice that consumes most of the marketing budget. These discounts are usually never seen by the end-users …
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…years. Reynolds already utilizes 40% MDF in its marketing mix. Increasing by 20% per year will allow sufficient time for marketing and account mangers to embrace their new responsibilities. Phasing in MDF will show incremental results to internal staff members at Reynolds and distributors, while minimizing the competition's exploitation during the system change. Implementation of MDF allows Reynolds to implement category management for the same cost as off-invoicing while offering a $43.8 million increase in net income annually.