What are MDFs?
July 27, 2020

Marketing Development Funds (MDFs) are the dollars companies put towards their channel partners to help them produce meaningful results. Channel-centric companies usually use MDFs for:

  • Conferences and tradeshows
  • Advertising and increased web presence  
  • Direct mail or email campaigns 
  • Other white-glove support services

While MDFs are useful, knowing how much to allocate is a challenge for many companies. Not only must you identify which partners most deserve MDFs, but you must also pinpoint which activities result in the highest ROI. In this post, we’ll share how to manage program funds more effectively and avoid common pitfalls.

 

Understanding Market Development Funds Best Practices

Companies allocate MDFs to partners to help them sell more products. While there are proven benefits of deploying MDFs, they tend to go unused and sometimes wasted. The main reason companies don’t see results from their MDF programs is that they weren’t strategic enough to allocate their funds properly. 

Another common issue is the tendency not to track the results of marketing initiatives. Without a plan and followup, companies lose out on valuable information that informs future MDF programs.

 

How to create a successful MDF management program

So you’ve decided to provide partners with MDFs, but how do you put them into action? Keep these two principles in mind when creating an MDF program: You must properly plan and budget your MDFs, and you must track and analyze your results. Consider the following: 

 

What are your MDF goals? 

What results do you hope to achieve with your MDF program? You can’t expect partners to reach goals that you haven’t set. Be strategic and develop benchmarks so partners better understand whether they meet your expectations.

As you begin building a budget for your MDFs, make it a point to get feedback and buy-in from your partners. You want to ensure you and your partners are on the same page regarding marketing priorities. Plus, your partners may offer valuable insight into competitors’ strategies or additional ideas to reach new audiences. 

 

Which partners will receive funds?

Investing in your most profitable partners ensures ROI on your MDFs. The partner selection process is critical. Gather and analyze existing partner performance data and metrics. Partner relationship management (PRM) software automatically gathers and analyzes MDF information

Using the report generated by your PRM, you can rank your partners by performance and opportunity for growth. The most common methods for measuring partner performance is by revenue and activity metrics. When you based MDF allocation on hard numbers, you have the highest likelihood of success.

Ranking partners will help you determine where to spend your MDFs. For example, let’s say you have a partner with high activity metrics, but you want your MDFs to increase revenue. As a secondary goal, you want to strengthen the relationship. In this example, a tradeshow would be the best investment because it allows partner companies to bond. 

 

What are the qualifications to receive MDFs?

Once you’ve determined which partners to award MDFs, create qualifying criteria. After all, you can’t approve every one of your partner’s requests for MDFs. This would be inefficient, and you’d lose control over your aim for the highest ROI activities. 

Create an approval process for MDF requests and filter them with criteria. For example, if your partner wants MDFs for a tradeshow, you may require exclusivity in the booth or on their sponsorship banners/materials. Your goal is to ensure that partners use MDFs to benefit your organization directly and produce desired results.

Examples of MDF application template fields for partners include: 

  • Which marketing activities will you fund with MDFs? (Trade Shows, email campaigns, etc.)
  • What is the expected outcome? (Number of leads, appointments, or revenue)
  • Current revenue or certification requirements 

Templatize the MDF application process and manage communications within the designated software. This will improve approval turn-around time, overall organization, and ambiguities in communication. Moreover, a PRM like Allbound will tie MDF usage directly to deal registrations to automatically grant deeper understanding of the effectiveness.

 

How will you track results?

Past results are one of the most critical pieces for effective budgeting. Go back and look at past MDF metrics. If you haven’t tracked the KPIs of your MDFs, it may be time to implement a PRM software to automate this process. By analyzing past results, you can create a well-informed, fact-based budget plan for your MDF program. 

Collecting data after each initiative allows your program to become more targeted. Targeted MDF programs yield the most ROI. Your data should show which marketing activities were most effective so you can double-down on these activities. Analyzing the data allows you to narrow down your approval process and create MDF application templates, available within the managing software. 

 

Bottom Line: MDF Best Practices Require Data and Strong Management

Achieving results from MDFs lies in a well-executed program that has a plan and KPIs. A strategic MDF program can empower your partners and increase sales. By hand-selecting partners and analyzing their results, you’ll see tangible ROI. Use your partner’s performance metrics to choose who can participate and how. By carefully determining qualifying criteria, you can ensure your MDFs are used only for beneficial activities. Lastly, proper tracking and analysis will provide the data you need to manage successful MDF initiatives. 

Tags: Blog
Ali Spiric