What are Market Development Funds (MDFs) and How Can You Use Them to Strengthen Your Partner Program?

Partner incentives are one of the key components in any partner program, and these can come in a range of forms. A common incentive that a vendor provides to its partner ecosystem are market development funds (MDFs).

What are market development funds?

These are marketing resources and other support that a channel makes available to its partners so they can increase awareness of and generate demand for their products.

Although MDFs are often used for marketing, that is not all they are good for. These funds can also be used for sales, events, online activation, product development, and more.

Considering its versatility, you might imagine that MDFs would be a useful addition to a channel manager’s arsenal – and they can be. However, a popular quote in the channel marketing space is that “70% of MDFs are never used.”

Top 2 challenges for running effective MDF programs

One of the biggest issues, that is most often cited by articles and research reports, is that MDFs frequently go unused. These funds pile up from year to year and end up being wasted, which leads to MDF programs getting a bad rap.

The other issue is that, even when MDFs are spent, it can be difficult to track return on investment. This is especially tricky when MDFs are used as a “bribe” simply to keep channel partners happy. When partners spend on things like customer entertainment – ball games, golf outings and so on – how would you track ROI on that expenditure?

Channel teams still face these challenges with MDF programs largely because it can be difficult to keep track of the entire process, especially if you are not using software that is able to put it all together. But when executed well, an MDF program can be a powerful addition to your channel.

How MDFs can strengthen your partner program

When fully utilized, MDFs can add considerable benefits to your partner program and help you increase revenue through your channel. Some of the things MDFs can enable include:

1. Faster penetration into new markets, which gives you a competitive advantage.
2. Better synergy with partners so you can leverage on each other to grow.
3. Increased channel marketing capabilities that allows exponential growth.

Any of these benefits on their own is a boost for your channel, but when experienced all at once, the difference is astounding. Here are some MDF marketing strategies you can explore to improve the returns from your partner program.

#1: Use your MDFs to enter new markets faster

To expand sales opportunities, you might want to look into new audiences – in a different geography or business vertical – but this can be time-consuming and costly if it is a completely new market, and you are doing it all on your own.

Rather than build your brand and grow a new audience from scratch, you can leverage on your existing partners who are already servicing customers in those markets. Offering the right incentives to a strategically positioned partner can mean quicker revenue growth, even in an area that might be completely new to you.

It is a win-win for both you and your partner. You are able to gain a foothold into a new marketplace at lower costs and accelerate your channel sales, while your partner reaps additional rewards from their efforts.

#2: Develop an MDF program that improves partner ecosystem

One of the problems that partners often cite for MDF programs is that they lack actionable information. In our experience, one of the primary reasons that MDF programs fail is that they are too complex. Partners do not know what funds are available and how they can apply to use those funds. Or when they do qualify for reimbursements, they do not even know how to claim those funds.

This can make for a less than satisfying partner experience, which results in a missed opportunity for deeper engagement with your partners.

A well-designed MDF program can help you increase partner loyalty and build longer term relationships with your partners, allowing you to keep track of how they are performing and how to build on their strengths.

This, in turn, allows you to identify partners with potential for growth and further incentivize them to sell your products. Doing this helps you increase customer lifetime value and get better ROI on your customer acquisition costs.

#3: Put your MDFs towards increasing channel marketing capabilities

Rather than viewing MDFs as merely transactional or just as an incentive, you can use MDFs to increase marketing support to partners and thus, amplify the marketing capability of your channel.

Some of the reasons your partners may not be doing more marketing is because they lack the knowledge, resources, or time to develop new tactics for selling. Remember that you are likely not their only vendor, and they may also be selling a range of products from other providers. Making it easier for them and providing the funds they need to sell your product, can be a significant incentive.

This is where having a through-channel marketing automation (TCMA) solution can come in handy. As a vendor, you can provide templates, brand materials, and so on for partners to easily use in co-branded campaigns that they can use MDFs to run.

See how Xerox used MDFs and Impartner’s Google Ads for the Channel to increase leads.

Using your MDFs in this manner increases the value of your channel to partners. The more they continue to grow with you, the more likely they are to stay active within your partner program.

Rethinking MDF for marketing and channel sales

Customer needs and behaviors are changing, and your partners are evolving to meet those demands. Traditional uses of MDFs no longer generate the same value as before and in order to maintain a healthy partner ecosystem, how you use MDFs has to change as well.

Although the current perception is that MDFs are a waste, this does not have to be the case. In fact, MDFs can generate significant ROI for your channel when used strategically. Learn more about how you can easily manage your MDFs to increase the effectiveness of your channel.

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