I'm honestly not sure either. What I've been doing is leveling fodder to max if it has a low level, then feeding it to another fodder to make it stronger, and matching colors when I feed to an actual crew member. Also I try to have several, so let's say I have a level 20 Zoro, I don't want to feed five level 20 fodder to him one at a time, because once he levels up (if he does, mind you), the cost becomes higher so you're basically wasting bells.
But then, leveling the fodder itself might be wasting bells too. It's just how I've done it, and I haven't seen a drastic drop in my money, so I assume I'm doing it somewhat correctly? Someone's probably got a surefire strategy that I haven't even considered before.