There are tons of marketing acronyms that tend to confuse business owners and new marketing professionals; one of them is MDF: Marketing Development Funds.
It’s a marketing strategy that can benefit specific companies that use the channel-centric business model and thus it’s not really talked about in detail in most marketing courses. Another reason why MDF is not widely beloved is that it also requires your company to make a long-term investment that may not bring in revenue in the beginning.
That’s why in this article, we will be talking all about MDF: what it is, why you need to know about it and how it may help your own company.
Now without further ado, let’s get started.
What is MDF: Marketing Development Funds?
Market Development Funds (MDF) are funds that a company provides to all its intermediaries such as dealers, distributors, and agents, so they can use them to run marketing and sales campaigns.
Businesses that use this channel-centric model usually use something like an MDF program for several things:
- Social media advertisements that help increase the company’s web presence
- Direct mail or email marketing campaigns aimed at a specific target audience
- Tradeshows and conferences
Many companies use MDF because they want to increase their brand’s awareness and this money enables their local partners to run marketing campaigns and popularize the company. Let’s take a look at an example: Say your business launches a new product that needs to be introduced to potential clients. By utilizing MDF, you can enable your channel partners to run adverts and kick-start the sales of the item in their regional market.
However, this is where things begin to get complicated. While MDF can be useful, figuring out how much money to allocate to this initiative is a challenge for a lot of businesses. Furthermore, there’s a need to identify exactly which channel partners are deserving of these funds and which specific initiatives will help bring the highest return on investment.
Examples of MDF Marketing
In real life, MDF marketing efforts have a ton of different forms. Some channel partners use the money to create marketing materials or start email campaigns. Others use MDF to get radio spots or be able to organize webinars. Usually, MDFs are used to cover all of the expenses around these different forms of marketing and that’s why they need to be able to produce results.
Most companies usually tie MDF allocation to performance, meaning that you need to be able to produce some kind of a measurable result in order to be eligible for receiving a portion of the money. In a lot of places, funds are allocated according to the sales rank of the channel partner. That’s why partners who have proven they can generate sales can get MDF before they start their initiative. MDFs are strategically used, and channel partners who want to get them have to show how they plan to use the money and what particular initiatives will help drive sales.
Another thing to note is that MDFs don’t always come in the form of money. Some companies support their partners by giving them additional marketing materials or organizing events in their area. Ultimately, MDFs are a way to empower your proven channel partners to continue helping your brand’s popularity grow and thus bring more sales.
How to Run a Successful MDF Program?
Okay, let’s say you’ve decided to run an MDF program for your company, but you don’t really know where to start and how to do it. Well, there are two main things you have to keep in mind: constant analysis and proper planning.
However, before you begin there are a few things you need to consider.
What Do You Hope to Achieve with MDF?
What goals do you have when it comes to your MDF program? What results do you hope to get? You have to be able to answer this question, as your partners won’t be able to reach targets that you can’t set. That’s why you have to think strategically and have benchmarks set in stone so that your partners understand what they have to achieve.
Once you start building a budget for your marketing development funds program, it’s a good practice to get feedback from your channel partners. That’s because you want to be sure that you and all your partners are on the same page when it comes to running this program.
Determine Which Partners Will Receive Funds
Having a partner selection process is crucial for a successful program. That’s why you need to gather all the data for the performance of each partner and analyze it. This will help you ensure that you invest in the partners who bring in the most sales and for whom an MDF program will be most useful.
When doing the analysis on all your channel partners, it’s good to have a ranking system so that you can determine where to spend most of your MDF budget.
Create Qualifying Criteria for Receiving MDFs
Once you have all the partners to whom you want to give MDFs, you have to create qualifying criteria. If you don’t you will be swamped with requests to approve different partners’ MDFs and this will only lose your valuable time.
That’s why you need to create an approval process for all MDF requests and have criteria as to which ones will get approved and which ones will get rejected. The goal is to ensure that your MDFs are used to benefit your company directly.
Consider How You Will Track Results
Using data from the past is one of the best ways to create a great budget for a current MDF campaign. In order to do that, you will need to check metrics from previous MDF initiatives, which will be impossible if you haven’t tracked them at all.
That’s why you need to figure out the best way to collect information after every initiative from the MDF program ends. Once the whole program is finished, it will be useful to you as it will enable you to determine which marketing activities brought the highest ROI and are worthwhile investments for future programs. Furthermore, having data from past programs will enable you to narrow down what you can do better next time.
Overall, running a marketing development funds program can be extremely beneficial for your business, if it’s done correctly. However, that’s easier said than done. The four steps in this paragraph are only the beginning; there are a ton of other tips that you have to follow consistently in order to get things right.
Best Practices to Follow When Creating an MDF Program
MDFs are allocated to channel partners in order to help them sell more products; however, many companies stop using MDFs because they don’t see any results and view them as a waste of money.
However, there’s a way to change that for your business, if you simply follow some best practices. Here are five MDF tips that you can use before running your first program:
1.Give Relevant Information to All Stakeholders
If the participants in a program don’t understand it, it’s likely that it won’t work at all. That’s why it’s vital that each stakeholder understands his role and what’s required from him.
- Channel Manager: Needs to be trained accordingly so he can understand the focus of the program (which regions, products, etc., it wants to affect), strategic priorities, key activities that will help it be successful, program parameters and processes, and what the expected ROI is.
- Channel Partners: Usually they need the same information as the channel manager; however, packaged in a different way that’s more relevant for their role. Here it’s important that your partner understands that your company is making an investment and you will expect it to generate results.
- Corporate Stakeholders: These are the people who will have to know the financial impact of running an MDF program: how the funds will be returned and what the expected ROI is (usually around 3-5%).
2.Get Frequent Feedback from Your Partners
Make sure you’re getting frequent feedback from your partners as to how the funds are getting allocated, what events they’re doing, or what other marketing initiatives they’re running. Try to make them give you updates at least once every two weeks so that you know how things are progressing.
Start measuring progress from the start, after each activity gets underway, so you have an idea of how things are going at any point during the run of the program.
3.Clarity, Consistency, Compliance: The three Cs of Success
In the world of investments, “variance” is a term used to refer to a risk factor that needs to be managed. With MDF, you can get software that will automatically eliminate the risk of unwanted variance in how the program is being run.
With an automated MDF program, you get the following:
- get an automatic notification after a request gets submitted.
- have an assurance that the approval flows are followed each time.
- have visibility on all metrics in real-time.
- only get to see the components of the program that are relevant for them.
- get a notification if a request gets denied, along with the information as to why.
4.Integrate Sales Performance Tools with the Program
If you know that a partner’s program generated 100 leads that will be great news for you. However, it will be even better if you know whether some of those leads led to an actual sale. If you choose to automate channel management tools, your vendors will be able to follow through opportunities to revenue. This will help you showcase the results of an MDF program to senior management in an even more impactful way.
5.Learn from Practice and Keep the Knowledge for Future Programs
Once your marketing development funds program is up and running and you’re able to collect all the information about key initiatives and important trends, you can immediately start looking for ways to better the performance of the program. Usually, the effectiveness of your program can be improved in two main ways:
- Channel partners can learn to “raise flags” early, so that channel managers can follow up if anyone isn’t doing their job properly.
- Once one team of partners learns something new about running a program, they can share that knowledge with other groups of partners, in order to improve the overall ROI of the program.
As you begin frequently running marketing development funds programs, you will be able to gather important knowledge and improve for the next ones. Along with that, changes in the marketing industry are always happening; that’s why it’s vital that you’re in tune with all the new trends.
As a company, you will have the opportunity to run many marketing initiatives. Some of them will be more successful than others. Nowadays, most businesses focus mainly on digital marketing: running email campaigns, using blogs for SEO, and using influencers to promote the brand on social media.
That’s why MDF programs aren’t the most popular marketing tool in the world. Unlike digital marketing initiatives that need the work of just a few people and can be completed in a week or two, in order to run MDF programs, you need the coordination of hundreds of people and the dedication of all your channel partners.
That being said, you shouldn’t completely rule them out of your marketing strategy. Marketing development funds are a great idea for businesses that use the channel-centric model and have multiple partners and distributors responsible for bringing brand awareness and driving sales. That’s because it will enable your whole network of partners to effectively run advertisement campaigns, organize live events and bring in sales to your company. All you have to do to make sure that happens is manage the MDF program properly and by following all the steps and tips listed in this article.