Winning partner mindshare spurs future growth, but your business must co-invest across the ecosystem. This means channel partners must be willing to make collaborative financial contributions that often cross company boundaries.
It’s really all about investing in mutual success. That starts with providing ample market development funds (MDF) to light the fuse on the rocket.
What are MDF Funds?
Say you hire a rock star graphic designer, but the tools they use are outdated. In this case, you may want to provide them with the right software to perform efficiently. The cash (or access) you give them to update their apps is called market development funds (MDF).
In other words, you are funding the channel partner with the resources needed to get the job done best.
In simple terms, MDFs are partner funds (and other assistance) that you provide to channel partners to help them with marketing and sales efforts. Not only does this sell more products/services/technologies faster and more efficiently, it increases brand awareness.
In some cases, MDF funding refers to lead generation, content, or other programs you pay for in-house and provide user access. It can also support efforts including:
- Sales training
- Tech certifications
- Demand generation
- Travel and events
- Close prospective sales
Allocating MDF Funds
How and where you choose to allocate an MDF program depends on a few channel partner considerations. It starts by clearly defining the specific partner type your business model is targeting.
The smaller the partner, the less likely they have top resources. They may rely more on word-of-mouth and referral marketing. In this case, a company may want to consider allocating MDF to social marketing and digital assets.
A fully-fleshed out partner program that is truly successful requires investment on both ends. When your partners succeed, so do you. Any MDF program should provide some form of return on investment (ROI). The easiest way to calculator this is:
MDF program ROI = (sales growth from MDF - MDF cost) / MDF cost
However, don’t carry the entire financial burden yourself. The point is not to become your partner’s marketing department, but rather to assist in strategic efforts to reach a common goal.
Tips for a Successful MDF Program
When pushing for market development, there are certain moves you can make to ensure a successful program. Here are some tips:
Assign a Project Manager
Always have an internal individual or team to manage the program in its entirety. Ideally, there should be a separate marketing function for your direct and indirect channels. These roles can include dedicated channel account managers (CAMs) and a program office for admin.
Set up Tracking
You must have a way to monitor and track marketing’s contribution to revenue. One solution is a tight integration between both parties’ CRM systems. If your partner doesn’t have one, you might consider this a prime place for co-investment.
An MDF program should never operate on an ad hoc basis. Here, automation of sales and marketing is essential. Templates and repeatable processes, forecasts, and performance measurement all lead to more accurate data and streamlined workflows.
There should be a commitment to measuring every step of the process to ensure MDF is budgeted accordingly. Without visibility, how will you know the ROI? Review the specific activities a partner performs with MDF and the resultant metrics.
For example, you give a managed service provider (MSP) market development funds for an email lead generation campaign. When submitting for campaign costs, the MSP should offer analytics like:
- Email volume
- Open rate
- Call-to-action conversions (clicks, downloads, etc)
- Number of leads as a result
In turn, the business providing the marketing development funds should look at metrics like:
- Number of qualified leads generated
- Number of leads closed
- Revenue of each closed lead
Ideally, your partner can submit all marketing activity for MDF reimbursement through your shared CRM.
Channel partners gauge their profitability by a commission or discount (profit margin). They also consider the costs of making the actual sale.
In some cases, businesses “gamify” MDF programs. This means, that when a partner makes a sale, it earns certain points or rewards toward MDF funding. This approach helps a brand ensure they are investing MDF in partners that actually generate revenue. It’s a win-win situation.
If you have smaller channel partners, it may be wise to co-innovate with them on marketing activities. Provide messaging and content for them to easily create campaigns and run efficient workflows. Engage with partners on a continual basis and furnish follow-up materials when needed.
Don’t just rely on one type of event or stream of content. Diversify your strategies, yet make campaigns super simple for partners to launch. Incorporate various types of digital marketing like product videos, white papers, and podcasts.
Maximizing Your Return
If used effectively and tracked carefully, MDF can create a significant return on investment for your business. It may take some time to set up the program and measure results, but it’s important to remain consistent.
Unlocking the potential of your MDF strategy drives channel sales and can pay real dividends.
Detailed planning, automation tools, and co-innovation allow you to better align with partners, working in lockstep to meet customer expectations and market demands together.