MDF - What is it? What's it for? How is it used?

The world is becoming a very different place to what it was just two years ago. Different types of activities are having to be undertaken to maintain awareness in the market and stay front of mind in partners and customers eyes.

Events are starting to come back in but are they going to be around for much longer with the new variants of this business killing disease coming to light?

What can vendors, distributors and partners do to stay current in the market?

Today, we look at MDF(Market development funds); What is it? What can it be used for? What’s a good process to use? Useful contacts to help with MDF usage.

What is MDF?

Market development funds or MDF for short has been around as long as marketing has existed.

The idea is to have a pot of money that is available for partners to use in order to increase reach, awareness and prominence in a market.

Example:

Vendor A has a pot of $500k to put towards marketing activities through partners. Partner A wants to do an event so they apply to the vendor for money to run the event and the vendor either rejects or approves the request. The event happens, the partner collects leads for the vendor and they generate business together. The partner submits the invoices for proof of cost and proof of execution and claims a percentage of the cost of activity back. Typically 50%.

That’s a very simple example of how it works but it is rather more intricate than this. We will explain proper process later in the article.

Where does the money come from?

We generally have two options here for where the money comes from for MDF. We can work on the basis of a percentage of the previous years revenues that have been generated by the partners on a tier basis or we can have an overall pot of money allocated to MDF which can be split on a case by case basis.

The previous years revenue method looks like this:

Depending on the tier of the partner, they will have a percentage attached to their tier on what they can use for MDF the following year.

In a typical Bronze / Silver / Gold tier structure, the partner percentage for MDF could look something like: Bronze – 0%, Silver – 2%, Gold – 3%.

If the silver level partner has attained 100k in revenues in the previous year, they will be entitled to $2,000 in MDF.

This amount is generally co-funded by the vendor and matched up to $4,000 for activities.

Time frames are put in place to ensure that the previous years earnings are utilised within the next financial year and not stacked year on year.

The case by case pot method:

Vendors who are just starting with a channel can have a separate pot that is not allocated based on previous results but instead on a case by case basis.

If the vendor allocates $300k for example to the pot, this can be used for co-funding activities that are requested from the partner as long as they are approved. This is still done on a percentage split of who pays for the activity. So that $300k can effectively be $600k in marketing funds.

A popular way of utilising the pot of money for new channel vendors is to start with the seed pot and transition over to previous revenue allocation after a set period of time. If revenues are made in the first 6 months of the year, the second half of the year can be on an earnings basis.

What can MDF be used for?

MDF is typically reserved for ROI generating activities.

Partners and distributors can use the money in conjunction with 3rd party providers such as marketing agencies, event organisers, ad network providers etc. Each activity needs a proof of cost and proof of execution submitting prior to reimbursement being provided by the vendor.

This list isn’t exhaustive but it does cover a large amount of activities that the money can be utilised for:

Digital Advertising

Co-branded online display advertising (e.g. banner ads), streaming or on-demand video, advertising, and promotions via mobile devices or other general online advertising of the vendors brand, products, solutions, or services.

Print Advertising

Co-branded newspaper, or magazine print advertising, outdoor advertising (e.g., billboards, posters, and banners), or other general print media advertising of the vendors brand, products, solutions, or services.

Merchandise

Low-value promotional items with vendor logo such as pens, pencils, lighters, caps, T-shirts, mugs, and pen drives used as customer giveaways. Items may be co-branded.

Events

The most difficult activity to plan in these recent times due to the global situation. Events are happening but they are at risk of being canceled last minute or being fulfilled at reduced capacity.

Co-branded participation at an event or a partner-hosted event featuring the vendors brand and its

products and services prominently.

Co-branded participation can include exhibiting at events organised by third parties, such as road shows, exhibitions, conferences or trade shows.

Partner-hosted events are activities created to generate awareness and educate potential or current

customers about the vendor and its products.

Training

Training activities for internal staff and/or Resellers which directly contribute to improved sales or support for the vendors products and services.

Webinars

Partner-hosted webinar activity targeting end-users with educational content related to the vendors products and services.

Marketing activities leading to the webinar are also typically covered, as long as they are directly linked.

Digital content

The creation and publishing of digital marketing content, including electronic catalogs, info graphics, e-books, video content, webpages including mobile-ready web pages, digital content within a mobile app, digital marketing brochures or other digital marketing assets, or curation of such content, featuring the vendors products, solutions, or services developed to support the digital buyer’s journey.

TV/Radio/Cinema Advertising

Co-branded radio, cinema, or television spots advertising vendors brand, products, solutions, or services.

A process for MDF

Keep it as simple as possible to avoid any confusion on all sides.

Have a system in place to log all MDF requests from distributors and partners and require them to provide:

Date of activity, activity details(what they want to do), cost of activity, fund request, estimated ROI (number of leads generated / number of new partners / number of closed deals)

Once the request has been submitted, after calculation of ROI, you either approve or reject it.

Once approved, the partner conducts the activity after paying for it all themselves

Upon proof of execution and proof of cost being submitted, the vendor reimburses the co-fund amount. Proof of execution can consist of invoices from the 3rd party supplier and invoices from the partner to cover time costs.

MDF monitoring can become difficult when you have lots of partners with different rates of MDF available.

Having a spreadsheet to handle this works but eventually a dedicated system that can handle MDF requests as well as calculations will be needed.

Useful contacts for MDF usage

PureChannels – UK/US based but globally working Channel marketing agency. Experts at creating campaigns for vendors of all sizes with packages to suit everyone. They can build campaigns with vendors, distributors and partners to cover all global territories. They work with the biggest names in the industry.

Your Sales Energy – US based marketing agency that specialise in SEO, copywriting and brand building for MSP’s. Very knowledgeable in the MSP space with years of experience in the market.

Sherpa – UK based with global presence. They work with some pretty big clients on creating a managing marketing campaigns. They have their own MDF platform which is a nice addition to their services.

Gorilla - Presence in the UK and US, these guys cover a multitude of services for the channel. From channel marketing to channel development, they are great at building things up from nothing!

Summary

MDF can be one of the quickest ways to accelerate awareness of your brand and offering when used correctly. If you have enough partners utilising the MDF system, you can spread the word by multiple means in multiple regions around the world at the same time whilst generating valuable opportunities on the back of those activities.

Use it wisely and don’t approve every request that comes through. Try to focus of activities that will generate a positive ROI as opposed to activities that are just focused on generating awareness.

Putting a hot air balloon in the air with your logo and your partners logo might sound cool but is it going to generate enough business to cover the cost of the campaign in the first place?

Calculating an ROI can be difficult but if there is a potential for an activity to generate leads based on reach vs amount of leads that can be collected vs amount of those leads that will likely close based on historic results, you will win the game.