What are Marketing Development Funds

If you’re unfamiliar with Market Development Funds, or MDFs, your company might be missing out on valuable resources.

MDFs are often utilized funds allocated towards marketing campaigns to boost sales and increase revenue. In this article, we’ll explore what MDFs are, their benefits, and how you can effectively create and manage MDF programs to enhance your sales efforts.

In case you need a refresher, MDFs are funds that vendors allocate to channel partners to support joint marketing activities, enhancing brand awareness and driving product sales. These funds are critical in developing cooperative advertising campaigns where both vendor and partner brands are featured.

Examples of MDF Funds

MDFs can finance a variety of marketing activities, including:

Lead Generation: Through SEO, email campaigns, and social media marketing.
Content Development: Including podcasts, social media posts, blogs, and video series.
Events: Such as webinars, trade shows, and training sessions.

How to Make a MDF Program

When setting up a MDF program, this is an overview of the steps you should follow:

Define the Funding Structure: Decide on the payout method, which could include reimbursements, rebates, co-op funds, or direct marketing placements.
Align on Marketing Goals: Make sure that both you and your partners have agreed upon goals that propel both businesses forward.
Budget Creation: What advertising activities will be prioritized and when will the funds be distributed?
Qualification Process: Establish a clear marketing strategy, metrics, and goals to determine fund allocation among partners.
ROI Measurement: Keep track of partner engagement and set up touchpoints to measure if the program is delivering results.

Reimbursement Strategies

Understanding how to reimburse partners is crucial. Here are a few models you might consider:

Accrual-Based Systems: Partners receive a percentage of their sales back towards marketing.
Fixed-Cost Funding: Provides partners with a predetermined fund amount for specific marketing campaigns.
Performance-Based Models: Rewards partners based on the sales or leads they generate through funded marketing activities.

How to Budget for MDFs

The budget for marketing development funds really depends on several factors, like how mature your channels are, your market presence, and the perks and incentives you’re offering through your partner ecosystem. Typically, about 2-6% of your channel budget should go to MDFs.

Figuring the right amount to budget can be tricky for vendors because every partner is different. The budget might very depending on the partner’s product, where they’re located, and how they co-market with the vendor.

It’s also crucial for vendors to set clear, measurable goals right from the start of the program. and, of course, it’s important for partners to keep track of their progress.

Vendor Benefits of MDF Programs

For vendors, think of MDFs not just as a line item expense but as a strategic investment. These funds are all about building stronger partnerships and expanding your market presence. Here’s how they pay off:

Enhanced Partner Loyalty: It’s simple — when you support your partners effectively, you build stronger relationships. This leads to partners who are more engageed and committed to not only meeting but exceeding sales targets.

Increased Sales: Smart use of MDFs can boost both direct sales from specific campaigns and ancillary sales through increased brand visibility. It’s a win-win; your partners succeed, and so do you.

Market Penetration: MDFs give you a powerful tool to break into new markets or to deepen your presence in existing ones. By funding targeting marketing campaigns, you can effectively adapt and expand your reach.

How Vendors Can Create a Strong MDF Program

When setting up an MDF program, vendors should ensure that the program’s structure and objectives align with their overarching strategic goals. This could range from increasing brand awareness and generating new business to investing in employee education.

Consider Expiration Dates: Check if there are MDF funds expiring at the end of the fiscal year and prioritize their utlization. This ensures that no allocated marketing dollars are wasted.

Follow Formal Guidelines: Provide clear guidelines for your partners on how to craft their proposals. You may have specific activities already funded, or you might be open to partner-driven proposals. Make sure these guidelines help channel partners align their requests with your strategic objectives.

Use Software Solutions: Managing MDF programs with Excel spreadsheets is a waste of time and resources. Consider software solutions like Computer Market Research’s Partner Portal.

Request Thoughtful Proposals: Require partners to submit detailed proposals outlining how they will use the funds. Ask for metrics and explanations showing how the proposed activities will benefit both parties and support overall marketing goals.

Measure Success: Monitor how effectively the funds are used by tracking partner engagement and the results of funded activities. This helps demonstrate the ROI of your MDF investments. Successful outcomes can justify increasing the funding pool or continuing support for effective strategies.

By implementing these practices, vendors can establish robust MDF programs that not only enhance partner performance but also drive their own marketing and sales objectives forward.