What are Marketing Development Funds, or MDF?

MDF, also known as marketing development funds, are used by vendors in an indirect sales channel to help their partners pay for the marketing materials and activities necessary to sell the vendors’ product or service.

Partners develop materials or conduct events as part of the process of selling vendors’ offerings, and the vendors allocate MDF to reimburse the partners for the expense.

It seems simple enough, and you may be using MDFs now with your partners already. But are you using them in ways that hinder your partners’ sales rather than helping them?

Let’s review how marketing development funds actually work and how you can maximize your co-marketing results as part of your overall channel marketing strategy.

How Do MDF Programs Work?

There are two key components of a robust marketing development program: eligibility and fund management. Below, we review what each of these terms mean in detail.

Eligibility

To qualify for MDFs, partners need to meet certain criteria. While specific requirements may vary, common eligibility factors include:

• Partner Type: MDF programs are typically designed for authorized partners, such as resellers or distributors, who have a formal agreement or partnership with your company.
• Partner Performance: Partners are often required to meet certain sales targets or achieve specific performance metrics to be eligible for MDFs. This ensures fund allocation is actively contributing to your organization’s growth.
• Partner Marketing Plan: Manufacturers may ask partners to submit a joint marketing plan. This outlines their proposed activities, including strategies, tactics, timelines, and expected outcomes. This ensuresthat MDF is used for well-defined marketing initiatives that drive business for both parties.

Fund Management

The best partner programs put guardrails in place to ensure efficient MDFs management and utilization. That usually involves:

1. Creating an approval process: Partners typically need to submit a proposal or request detailing the marketing activities for which they require MDF. The manufacturer reviews the proposal and decides whether to approve the request. This might be based on factors like alignment with the manufacturer’s marketing goals and available budget.
2. Managing fund disbursement: Once a proposal is approved, the manufacturer disburses the allocated funds to the partner. This transfer can happen through various methods. Examples include: direct payment, reimbursement against submitted invoices, or credits applied to the partner’s account.
3. Cross-checking fund utilization: Partners are expected to use the allocated funds exclusively for the agreed-upon marketing activities outlined in their approved proposal. Funds are usually meant to cover expenses related to advertising, promotions, trade shows, product launches, collateral development, and other co-marketing initiatives.
4. Maintaining documentation: Storing your invoices, receipts, and proof of expenses can help your accounting team and be useful in case of disputes.
5. Reporting on fund success: Assessing the outcomes and effectiveness of marketing activities supported by MDFs is critical for determining your future partner marketing budget and identifying the best joint marketing strategies. This evaluation can include metrics such as increased sales, brand visibility, lead generation, or other predefined KPIs.

Leveraging Marketing Development Funds for Success

MDFs can have a dramatic impact on your ability to draw in new referrals, close upsell opportunities, and acquire other qualified leads. But achieving those results takes careful planning, collaboration, and measurement.

Strategic Planning

First, you have to step back and create a strategy that incorporates partners. What do they need to do to expand the market for your product?

Those are the behaviors you reward with appropriate incentives, including MDF.

For example, you may realize that in order to expand your market you need to know what’s selling where, and as soon as possible. It’s critical to precisely measure your pipeline, so you need your partners to register deals.

Marketing development funds become the incentive for partners to register deals: “Register the deal, and you get MDF.” Using the MDF management capabilities of a Partner Relationship Management solution like Channeltivity makes it easy to tie together and measure deal registration and MDF usage.

Collaboration

Marketing Development Funds can be a powerful incentive, but you have to make sure you know what behavior you want to achieve.

Many companies view MDF as an expense, something to limit and control.

But really, MDF is an enablement tool, a mechanism for providing incentives for good partner behavior — i.e. market penetration, brand and local awareness, and referrals.

Get your channel marketing manager involved in brainstorming potential co-marketing activities and make it as easy as possible for partners to go to market with you, with predefined messaging, potential channels, and proof of the types of marketing campaigns that have worked before.

Tying MDF to Revenue

Last, but not least, it’s critical to measure and track the effectiveness of your MDF program. And that effectiveness can be measured in terms of:

1. Your Deal Registration Pipeline

You know your MDF program is working if the events, campaigns, and trade shows you fund are bringing in leads. But it’s hard to keep track of all that without a native way to monitor the ROI of your marketing development-funded activities.

That’s why Channeltivity has a built-in “ROI Statistics & Integration with Deal Registration” feature. Activating this setting allows partners and distributors to link Deal Registrations to MDF-funded activities.

Whenever partners create a new Deal Registration, they’ll be prompted to say whether the Deal originated from an MDF-funded activity. If yes, the system will ask them to select the corresponding MDF request.

On the backend, Channeltivity will automatically calculate:

• Registered Deals: The number of Deals registered by the Partner or Distributor.
• Won Deals: The number of Deals in the “Closed/Won” Stage and the average amount of those Deals. 
• Generated Revenue: The combined total amount of Closed/Won Deals. 
• ROI Percentage: The Generated Revenue divided by the Total MDF Reimbursement Amount of linked MDF Requests. 

With that data at your fingertips, you can not only understand how each Organization is leveraging MDF, you can also gain insight into the types of MDF activities that perform best in the channel.

2. Your Partner Satisfaction

Set a day every month or every quarter to evaluate your MDF program with your partners. Or, send them a survey — what’s working? What’s not?

Getting their feedback can help you refine your MDF structure over time, investing in the marketing programs that are most beneficial to your bottom line. To make this evaluation process easier, consider using MDF software that’s part of a self-service PRM with built-in tagging for deals that originate from MDF-sponsored events.

MDF FAQs

Q: What is a marketing development fund?

A: MDF is designed to support the marketing activities of these partners, helping them promote your company’s products or services. Partners can request funds for co-marketing initiatives such as advertising campaigns, trade shows, webinars, email campaigns, direct mail, and lead generation programs. MDF programs create a mutually beneficial partnership by empowering partners with the necessary resources to market your company’s offerings, bring in leads, and get their agreed-upon deal compensation.

Q: How are marketing development funds used?

A: The specific utilization of MDF may vary depending on the company’s policies and objectives.

Typically, MDF is utilized for activities such as advertising campaigns, trade show participation, digital marketing initiatives, content creation, collateral development, lead generation programs, and product launches. These funds enable partners or resellers to enhance their marketing efforts and increase brand visibility.

MDFs can cover expenses related to creative design, media placement, event booth rentals, promotional materials, online advertising, and more. By utilizing MDFs effectively, companies can strengthen their partnerships, drive sales, and create a competitive advantage in the market.

Q: What are the benefits of market development funds?

A: MDFs offer several benefits to both manufacturers or vendors and their channel partners, such as:

• Increased Sales and Revenue: MDF-funded activities are designed to create brand awareness, attract prospects, and convert them into paying customers. With targeted marketing initiatives, partners can more easily generate leads, drive customer acquisition, and ultimately increase your sales. 

• Stronger Channel Relationships: Providing MDF demonstrates a commitment to supporting channel partners’ success. It fosters stronger relationships, trust, and collaboration between manufacturers and their partners, leading to long-term partnerships and mutual growth.

• Market Expansion Opportunities: MDF can be utilized to enter new markets, target specific industries, or explore untapped segments. By supporting partners in these endeavors, manufacturers can expand their market reach and unlock new revenue streams.

• Brand Visibility and Recognition: Through MDF-supported marketing activities, partners can increase brand visibility, improve brand recognition, and enhance their reputation in the marketplace. This contributes to building a strong brand presence and driving customer loyalty.

• Shared Marketing Insights: MDF programs often involve collaboration and exchange of marketing insights between manufacturers and partners. This knowledge-sharing fosters mutual learning, enables partners to leverage best practices, and strengthens overall marketing capabilities.

More MDF Resources

• Our MDF Software
• 3 MDF Best Practices That Work
• It’s time to revamp your MDF program
• Which way do you go? MDF or Co-Op?