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Channel Matters Blog > February 2013 > Work out the ROI on MDF

Work out the ROI on MDF

by Andy Grant
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One common element of most channel programs is the availability of Market Development Funding (MDF), sometimes called Joint Marketing Fund (JMF) or Co-Op Funding; but many MDF requests are not approved because they lack simple metrics or an expected return on investment.

I think it is fair to say that most ICT vendors, regardless of origin, size and geographic coverage, offer some form of channel program to their channel partners. It might be something really simple like “Please fill in this form and invest $20K in training and demonstration equipment and then we will consider offering you an authorized status” but it is more common to have different programs suited to different geographies, partner types, revenues or skill sets. One common element of most channel programs is the availability of Market Development Funding (MDF), sometimes called Joint Marketing Fund (JMF) or Co-Op Funding.

Broadly speaking MDF are usually available from vendors in two forms:
  • Accrued – earned as a percentage of partner revenue. 
  • Discretionary – Available to partner who submits the best plan to spend the available budget.
Funds that are accrued can usually be spent within a 6 to 12 month window on activities that are listed in guidelines provided by the vendor. This approach is more restrictive for new partners as they may need to wait 6 to 12 months to accrue enough funding to create a decent awareness and acquisition program.

Discretionary funding should be open to all partners; funding decisions are made based upon the merits and metrics of the funding application. This approach can help a vendor expand in markets or head off the competition in a particular market, or when launching a new product.

Whichever form of MDF funding a vendor chooses to implement in their channel program, one simple rule still exists.
  • An MDF application that includes some calculation of expected Return on Investment (ROI) is much more likely to be approved.
Channel managers should coach and mentor partners to think through their marketing initiatives and include some kind of ROI justification. The process is doesn’t need to be complicated. Each initiative should describe an ‘Overall Objective’ which should be linked to what you are trying to achieve; is it to build relationships, book appointments or close business?  

Consider this simple hypothetical example. Imagine a partner plans a small campaign to fill an event at a vendor’s executive briefing center.
  • They set out to have 24 people attend. Their experience shows they will need to invite 48 people to get 24 registrations (2:1).
  • From 24 attendees they are targeting follow up meetings with 8 attendees (3:1)
  • From 8 meetings they can expect to close 2 deals (4:1)
  • If their average deal size is $50K their aim will be to close $100K of business
  • The cost of the event will be $5K; that’s an overall ROI of 20:1
Many MDF requests lack even simple metrics like these. In my experience if a vendor’s marketing department received an MDF application containing this type of detail, headlined by an expected ROI and showing quite clearly how they intend to achieve this result, the MDF funding application would definitely be considered first amongst all the other partner requests.  

If your partners really want to secure MDF funding include this in your joint-partner plan and help them put together a better funding application leading with the expected ROI.
Last modified on 6/30/2013 10:11:23 PM
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