Market development funds or MDF are used in indirect sales channels whereby funds are made available by vendors to help channel partners (resellers, VARs, and distributors) sell its products by contributing to marketing materials and activities.
Market development funds (MDF), like most good things, are subject to some level of abuse. Channel managers know they need to provide partners with some level of marketing assistance as partners have limited marketing resources. Of their available budget dollars, partners allocate most to either hiring salespeople or engineers. As a result, most channel partners have very little in the way of marketing expertise. The average channel partner too often typically views marketing as, at best, a sales support function.
No Direct Correlation
When marketing gets treated as little more than a sales adjunct, the more limited the return on those investments becomes. There might be some value to be gained from a sales event involving, for example, contracting a retired sports legend to appear at a customer event. But usually, there’s no direct correlation between those events and increased revenue for a vendor. End customers may view the channel partner that funded the event more warmly. But the odds are low they will sign a contract just because they got to shake hands. Or because somebody other than them paid for a drink and a photo opportunity.
Most sophisticated channel organizations are now looking to maximize investment in market development funds in a programmatic way that goes well beyond a one-time sales event. To prod channel partners in that direction, savvy channel managers are more aggressively measuring the results of any given marketing effort a channel manager makes.
Channel managers are now making concrete recommendations relative to what types of marketing programs they are willing to fund. These recommendations are based on data they can now collect concerning how useful different types of marketing initiatives are.
The challenge channel managers face is in dynamically allocating limited marketing budgets across those activities. As marketing increasingly becomes a science, marketing professionals are being held accountable for the return on every dollar spent. The wild spending days of Don Draper and the cast from Mad Men are no more. Decisions on where to allocate marketing dollars are being made in near real-time, based on data generated within marketing automation systems. As a logical extension of those systems, channel automation platform such as Channel Mechanics provide channel managers with both the data demanded by corporate marketers to justify allocations as well as the actionable insights required to optimize the distribution of marketing dollars across a range of classes and types of partners.
In the case of Channel Mechanics that means being able to take advantage of a software-as-a-service (SaaS) application. Now you can precisely pinpoint which partner is going to deliver the highest yield by region, vertical industry or product category.
Of course, the only thing more frustrating than marketing dollars poorly spent is dollars that are never spent. Every channel manager knows there are pockets of Market Development Funds dollars that never get paid-out. Primarily because channel partners are unaware they exist. A channel automation platform such as Channel Mechanics provides a centralized means of notifying partners what funds are available. In addition to how best to qualify to access them. Best of all, the management of that spending occurs within a framework that any corporate auditor can quickly follow. In fact, once the workflow surrounding qualifying for the funds is documented, the entire process can be automated on an end-to-end basis.
Naturally, we all know a poorly managed channel marketing program can be easily exploited. It’s not uncommon for some partners to come to think of Market Development Funds (MDF) as something akin to an entitlement program that offsets some of their lifestyle costs.
The fine-line channel managers need to walk is holding partners accountable for marketing dollars in a way that doesn’t discourage them from ever taking advantage of MDF in the first place.
The best and only way to achieve that goal is to rely on a channel automation platform that provides the visibility needed to quickly see who in the channel is doing precisely what with those marketing dollars at any given time. Therefore, for a customized demo of how we at Channel Mechanics enable channel partners to navigate that fine line, please get in touch here.
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- Guiding Principles for a Successful MDF Program