Market Development Funds (MDF) have the potential to generate considerable ROI on your channel marketing when properly executed. But when it comes to MDF, there is one question we frequently hear from vendors. And that is whether to incorporate an Accrual MDF Program or a Proposal-Based Program. Here we share a little insights into both types.
MDF programs can take many forms, including accrual based programs (often Co-op), where funds are accrued based on predetermined sales goals; and proposal-based programs (MDF), where focused partners are allocated a specific amount of dollars for marketing regardless of revenue performance.
Proposal-Based Programs Are Proving Popular
In our recent webinar “Forget Surviving, How to Ensure your MDF Program Thrives in 2023“, we polled our audience to discover which type of MDF Program they were utilizing. Our poll results highlighted that 66% run a proposal-based MDF program. This compares with just 9% accruals, 17% a hybrid approach and 9% other. This continuing evolution to proposal-based MDF is the result of numerous red flags. These include low utilization of funds and the need to engage with focused partners across the entire partner ecosystem. Whilst concurrently embracing new marketing trends to generate demand.
Accrual Based MDF – Putting in the Performance
In an “accruals-based program”, funds automatically accumulate as a percent of each partner’s revenue performance based on predetermined sales goals. Within the program rules, there’s typically a revenue entry level but generally all partners will qualify to participate. Typically, the MDF is awarded to the same partners that are already performing, often with little room for exponential growth. All while smaller partners rarely accrue enough funds to do anything significant with. This creates a real challenge for the vendor. Often seen as contractually obligated funds, they are designed to be spent on pre-approved marketing activities. As such, research shows partner participation rates at approximately 50%. With the balance of funds rarely taken up.
Proposal-Based MDF – Perfecting Partner Proposals
The past decade has seen a massive trend shift in how vendors make MDF available to partners. This is fuelled by a growing need from partners for a more personalized approach when working with vendors to meet sales goals. By working closer with a mix of partners, vendors are designing a more effective, collaborative, and targeted sales and marketing approach to MDF for growth.
Open to all partners in a vendor ecosystem, “proposal-based MDF” intends to support Partners’ efforts to build and grow their business. This is achieved by providing funds to train and certify, develop complementary offerings and implement demand generation campaigns that identify and create new (sourced) opportunities.
Proposal-based MDF incorporates a solid marketing proposal, including campaign tactics, timelines, and anticipated performance metrics (deal reg, pipeline volume, etc.) that tick the approved marketing activities box. This results in an allocated amount of dollars for that partner marketing activity, regardless of revenue performance. Well-planned and communicated, proposal-based MDF programs are a great enabler, assisting vendors in grabbing market share by leveraging the creativity, energy and networks of their partners. This in turn helps to close more deals and grow sales.
A Hybrid Approach to MDF
Our poll shows that 17% of vendors are offering a hybrid MDF program approach to their partner ecosystem. This incorporates a mixture of earned and discretionary funds, depending on the partner program goals. Marketing activities are driven by both funded initiatives and partner performance, encouraging customer acquisition, retention, and growth.
Ease of Doing Business
Whether you opt for an accrual or proposal-based MDF program, it should be about helping partners to win new business. However, we all know MDF can frustrate partners by the amount of time required to input projects and claims. Not to mention delays in receiving reimbursement. The goal of a successful MDF Program is to deliver high-value partner experiences through a simplified process, reducing the number of touch-points required to complete a task. Unlocking this potential will deliver measurable benefits for your business. All while simultaneously making you their vendor of choice.
Channel program automation platform technology empowers vendors to design, deploy, track and measure MDF ROI. All while engaging partners in entirely new ways. Learn more by booking a demo of our Market Development Fund (MDF) Management program.
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