12 Market Development Fund Best Practices to Maximize ROI

In this video we’re going to teach you the 12 best practices for maximizing ROI from Market Development Funds.

Basically, MDF programs are designed to help vendors and their channel partners collaborate on marketing initiatives to drive business growth. However, many MDF programs fall short because of poor adoption and execution.

For example, it’s estimated that billions of dollars of MDF funds go wasted each year.

To overcome these challenges, the first best practice is to

1. Plan Long Term

Most partners focus only on the short-term and quarterly goals. This is a sure path to failure. It’s like trying to win a race by only looking at the next step rather than the finish line. Effective marketing requires long-term thinking and planning well into the future.

The solution is to clearly communicate these expectations to your partners. Also, rather than solely focusing on short-term goals, plan your MDF activities for at least 6 months to a year. Use data, analytics, and insights to forecast future needs and opportunities.

This allows you to allocate resources more effectively and ensures that your MDF initiatives align with your overall business objectives.

2. Keep it Simple

I understand that vendors don’t want to hand out cash willy nilly. But if the application process is too complex, it becomes a daunting task for partners. It’s like waiting in line at the DMV – so time-consuming that partners can’t justify the effort.

Focus on streamlining your program by cutting out unnecessary elements that do not contribute to revenue generation. The goal is to make the program easy to understand and execute. This ensures that partners can quickly grasp the requirements and benefits.

For example, offer bonuses for achieving milestones like a 10-20% increase in sales compared to the previous quarter or year. Incentivize selling high-margin products with an extra 5% commission.

3. Go Above and Beyond to Motivate Partners

One reason partners might neglect their vendor’s MDF programs is because of competition. There’s simply too many MDF programs. Imagine a tech store that sells multiple brands of laptops. They might promote a certain brand only as an alternative or add-on, not as your main focus. This is especially common in banking, insurance, finance, and technology sectors where partners juggle multiple vendors.

Because of this divided focus, partners often neglect certain vendors’ products, leading to unclaimed market development funds.

The solution is to ensure that all aspects of your MDF program – sales, marketing, technical, and logistics – are aligned to create demand. Put yourself in your partners’ shoes and design incentives that are appealing and motivating.

You can also boost those partners who are already working hard. For them, you could offer additional marketing services and personalized communication. It’s a no brainer that building stronger channel relationships leads to mutual growth.

4. Celebrate Successes

When a partner’s campaign succeeds, celebrate it widely. Sharing success stories not only boosts morale but also provides a blueprint for other partners to follow. For example, you could give a trophy to reward “the top channel partner of Q1 2024.” Or you could send an email blast to your partners breaking down the success of a channel partner.

5. Be Patient

MDF programs can often taken time to show results. Avoid the temptation to tweak or abandon a program too quickly. You should allow sufficient time for campaigns to gain traction and demonstrate their effectiveness.

You should also clearly communicate these expectations to your partners. Like any relationship, communication is key.

6. Follow the Data

There’s a saying in business: “You can’t manage what you don’t measure.”

On that note, the reason many programs flounder is because they’re not studying their data for opportunities for improvement. This is like driving without a map – to get where you want to go, you need to know where you are. With that, you want to study your MDF program’s key performance indicators or KPIs.

Here are a few essential metrics to keep your program on track:

Enrollment Rate: This measures how many eligible partners are signing up for your program. A high rate indicates strong appeal and effective marketing. Tracking changes year-over-year can reveal important trends about partner interest.

Participation Rate: This gauges how actively partners engage with the program. Metrics like website visits and time spent on your rewards portal offer insights into how compelling your program is. Low engagement means it’s time to tweak your offerings.

Sales Conversion Rate: Monitor how many leads are converting into sales through the incentive program. This indicator helps assess the direct impact of incentives on sales performance.

Average Deal Size: This tracks the average revenue per closed deal by partners in the program. An increasing trend can indicate that your high-margin product incentives are working.

Customer Retention Rate: For programs targeting existing customers through partners, this metric helps you understand how effectively the program keeps customers coming back.

To better analyze your partner’s KPI, consider Computer Market Research’s Partner Portal with its elegant program interface, instant access to relevant partner data, and robust management capabilities. There’s also no need for spreadsheets or extra work for you. At the same time, you get higher ROI, more engaged partners, and greater clarity of ecosystem effectiveness.

7. Establish a Strong Governance Framework

Some MDF programs can get too complex. This leads to uncontrolled spending and inefficiencies. To address these challenges, it’s essential to establish an effective structure that fosters collaboration among your partners.

Additionally, regular meetings and discussion can help align priorities, steer MDF investments, and streamline back-office processes. Establish a clear set of allocation criteria like market potential, partner performance, and alignment with marketing campaigns.

8. Motivate Your Partners

This advice is simple yet it’s arguably where most MDF programs fail.

For example, some MDF programs require channel partners to invest their own money first and seek reimbursement from the vendor, which can take over 90 days. For smaller partners, this is especially challenging. It’s like asking someone to pay upfront for a job where they won’t get paid for until three months later.

On a similar note, some MDF programs fail to motivate their partners. One possible solution is to implement gamification. This could make your program more engaging. Integrate elements like leaderboards, points, badges, and achievement levels. It could also include monthly or quarterly contests where partners earn badges for hitting sales targets.

9. Diversify your Incentives

The most common usage of MDF funds is money reimbursed for advertising efforts. This is a strong way to motivate partners and make more money in the channel. But it isn’t the only way.

You can also incentivize partners to sign up for training programs and certifications in exchange for rebates. Through education, this can improve the performance of their salespeople. On that note, vendors can also offer SPIFFs, which could be gift cards, vouchers, or travel incentives. This would motivate salespeople to hit short-term goals.

10. Invest in the Right Tools

It’s alarming how many vendors use Excel spreadsheets to manage their co-op MDF funds. Not only is this time-consuming and cumbersome, it’s also ineffective. It’s not easy to track KPIs or identify areas for improvement.

On that note, consider investing in software tools like Computer Market Research’s Partner Portal (wink wink).

11. Communication is Key

Effective communication is essential for maximizing the ROI from MDF programs. Require structured plan approval and proof of performance from partners.

Regularly review activities and results to track ROI. This helps you measure the effectiveness of your MDF investments and make data-driven decisions to optimize future campaigns. Clear communication ensures that partners understand expectations and can provide the necessary documentation and feedback for continuous improvement.

12. Eliminate Corruption and Ensure Fairness

Being clear and fair is the name of the game. Many times, partners with no proof of performance submit claims and get paid because of their status or relationship. The word spreads, and it’s unfair to partners who are working hard to drive results.

Be very selective about who you pay based on performance. Establish transparent criteria for claim approvals and stick to them. This builds trust with your partners and ensures that MDF funds are used effectively to drive results.

Ensure that all partners are held to the same standards and that funds are allocated based on merit, not favoritism.