Why channel partners must leverage MDFs

Marketing is a vital aspect of operating any business, however, running regular campaigns can drain budgets resulting in channel firms not considering it as a priority. Reseller ME examines how partners can secure vendors’ market development funds (MDFs)and use it efficiently.

Partners have access to vendors’ Market Development Funds (MDFs) to, as the term suggests, grow the market and create demand generation. However, most often than not, these funds are not used as effectively as they should be and partners also grapple with understanding how to acquire a bigger share of the resources. A worldwide channel survey done by ZINFI Technologies, a Unified Channel Management (UCM) innovation provider, revealed that 60 percent of market development funds (MDF) are not used on a quarterly basis. According to the company, the 40 percent of the cases where the funds are claimed, it is usually by the larger partners who possess the knowledge on navigating the MDF approval process.

Graham Porter, head, Channels, Middle East, Veeam, says that in most schemes, vendors allocate a percentage of their revenues from the previous quarter to distributors, allowing them to do joint marketing with their resellers around a vendor’s offerings.

“While some vendors spend their entire MDF in this manner, others have a two-tier approach where they sell directly to their largest partners and the smaller ones buy from distribution,” he says. “In this case, the majority of the MDF goes to big partners as it becomes a simple reward for the revenue they generate and the training and marketing they are expected to do based on their status level.”

Therefore, with direct access to the vendors and in-depth understanding of the schemes, big partners do get more than their fair share, he says. What about those smaller partners who liaise with distribution?

According to Porter, “MDFs are viewed as a black art to many players in the channel.”

Most partners believe that vendors have the funds available to jointly develop opportunities for their products. “However, it’s hard to see where it is and how you can get to it,” he adds.

Porter adds that those smaller partners who are buying from distribution should work with their distributors closely to create a plan that works for them.

Partners, whether big or small, who take the time to understand the criteria that vendors look at before allocating the MDFs can stand a chance to win a share of it. But this is easier said than done, as each vendor might have different yardsticks.

“Vendors look for effective ways to meet goals set for specific objectives, such as increase overall sales, acquire new customers, grow market share, increase brand value among many others. Alignment with vendors’ marketing strategy and emphasis on achieving business goals is important,” explains Jenice Bhatia, channel manager, META, Centrify.

The key criteria for MDF allocation includes measurable ROI in terms of onboarding, recruitment, trainings or verifications completed, PoC sessions and leads generated, says Shankari Gnanadesikan, marketing manager, Ingram Micro.

She adds, “Closure rate is another significant benchmark that partners should pay close attention to in order to claim the funds.”

Agreeing, Porter urges partners to begin by understanding vendors’ priorities.

He says, “Often, it is around promoting new products and services, so a partner who focuses on the new offerings will be more attractive.”

He also cautions partners from proposing an event without any differentiation from the competition. “This is much less likely to be approved,” he says. “Especially when distributors have a long wish list of requests from their partners, which is sent to the vendor every quarter. This frequently has to be cut by 75 percent.”

By devising an effective plan early on and with an innovative approach, partners can ensure they receive a bigger share of the funds. They have to implement creative methods to aim for great results, says Bhatia

“Partners are well experienced on solution selling and their value can be demonstrated by leveraging complimenting vendors to collaborate. By maintaining a track record of timely execution and demonstrating positive ROI results, partners could be granted a significant share of MDF funds,” she adds.

Currently, there are quite a few frustrations that regional channel partners have when it comes to MDFs.

Gnanadesikan says, “We have numerous limitations on usage of funds. Increasingly, vendors want to emphasis on demand generation and ROI from the activities, which can be realised only in the long term. Hence, it is difficult to justify investments in the short term.”

Bhatia adds, “Vendors often roll out global programmes and campaigns and while these could be customised to suit regional dynamics, partners usually expect the vendor to support them with regional initiatives. When there are limitations from both sides from resources point of view, it could lead to frustration and lack of ownership. Extensive policies and process from vendors can deter partners from executing their plan effectively.”

At the end of the day, Porter says, partners need to understand the vendor programme and their timescales.

“Partners have to examine what gets vendors excited and then figure out who can help them propose a relevant plan around this to the vendor. Typically, it is via a distributor, therefore multiple people need to be influenced. Partners need to understand what will close the sale and not have their proposal rejected, which is where the current partner frustration is,” he explains.

While understanding the vendors’ roadmap and aligning to their regional strategies will help partners gain a bigger share of the funds, it is also a responsibility from the vendors’ end to ensure the funds are utilised and done so effectively.

Gnanadesikan adds, “By creating annual marketing plans closely aligned to business plans proactively and committing to the overall minimum ROI guaranteed from the investment secured can help resellers to use these funds effectively.”

ZINFI Technologies’ survey indicates that vendors need to firstly focus on partners who are using the funds and help them with the process of applying for MDFs. They need to also invest in eliminating channel corruption, which is an issue that is not addressed often. Vendors can further help by automating the channel marketing platform so that it becomes easier for partners to search and execute campaigns. Lastly, according to the survey, vendors need to look at aiding their partners through dedicated concierge services, so that each partner receive customised support.

Distributors and vendors together need to analyse the opportunities that MDFs can open up for channel partners and educate the resellers on how they can apply for these funds and utilise it efficiently.