Planning and Implementing a Government Focused Market Development Fund (MDF)
12 Best Practices for OEMs and Channel Partners
[This article is part of ScaleUP USA’s Federal Business Accelerator program which helps businesses of all sizes establish and grow their US federal government practice. Learn more by joining the free workshop.]
The Insider Perspective:
In my 25+ years of technology career, I have worked in leadership positions in Federal, State, and local governments. During this time I have been “bombarded” with thousands of pieces of (useless) marketing material and sales calls. The offices I led have bought billions of dollars worth of technology products and services. Unfortunately, I have observed that 9 out of 10 sales calls lead to no follow-up wins, frustrating both the seller and the buyer. More importantly, the marketing campaigns and promotions that companies do towards their federal and government clients and prospects are many times outdated in their approach and meaningless. The question is why is this happening and can it be corrected?
This situation has arisen, because of several reasons. First, currently government marketing and sales campaigns are run based on sellers perspective of the buyer and not on buyers insight or needs and this needs to change.
Second, the government marketing and advertising budgets are utilizing older methodology and tactics which do not work in the hyper-intensive, heavily multi-tasked government world.
When you have a hundred unread emails, the possibility you will open, read a white paper attached to an email blast and then call up the seller is unrealistic at best!
Essentially, plain old government advertising and marketing is dead!
Relationship and trust building focused edusales is very much in vogue!
Change your government campaigns or be left behind.
This is especially true if you are targeting large federal, state or local government accounts for sales.
Best Practice #1: Build government marketing and sales campaigns based on government buyers needs and not sellers perspective of the government buyer!
What has this got to do with the deployment of business to business (B2B) or business to government (B2G) Market Development Funds? Everything. Each year tens of billions of dollars worth of these funds are utilized to run ineffective government advertising and marketing campaigns and wasted. What if we could use some of the best practices to improve their impact so all OEMs, channel partners, and buyers get the results they seek?
Market Development Funds Vs. Co-Op Funds:
Before we get into details of best practices in implementing government Market Development Funds (MDF), I want to address the difference between MDF’s and Cooperative Advertising Funds (Co-Op Funds).
Market Development Funds are incentives made available by Manufacturers and Brands (OEM’s) for channel partners like distributors, value-added resellers, affiliates, and others to create targeted local market awareness and to generate sales leads. MDF’s are typically provided before the actual marketing program is implemented by the channel partner. If you are an OEM and don’t have a MDF program, set one up. You could get something going for as low as $25K per year, though larger amounts are much preferred.
Cooperative advertising funds are typically promotional reimbursements made to channel partners like distributors, value-added resellers, affiliates, and others after implementation of the actual marketing program based on some pre-agreed sales performance criteria and implementation guidelines.
BEST PRACTICE #2: We suggest that government MDF’s generally work better than government Co-Op funds as they are forward-looking and the OEM has a better opportunity to strategize execution with the channel partner before implementation versus Co-Op programs which are historical in nature, where the money is already spent, and there is not much the OEM can do to improve performance while reimbursing the amount to the channel partner.
Government Market Development Funds, Funding Mechanisms
Government MDF’s can be distributed by various different mechanisms. There can be flexible funding (channel partner controls fund utilization) to focused funding (manufacturer controls fund utilization). Funding can also be based on the channel partner’s past success (peak performer, average performer, and low-performer).
BEST PRACTICE #3: Typically the government MDF’s are distributed either as a standard or fixed allowance or a full stipend that the channel partner can spend on OEM’s pre-approved programs. This is the ideal option and a best practice, especially when the stipend covers all the cost associated with the channel partner’s specific marketing program. What is critically important here is to make sure the channel partners not only have the necessary funds but also have the necessary expertise to build and conduct a modern, relevant, and impactful government marketing campaign or else a half-baked government marketing program will emerge which will benefit no one. The latter happens all the time.
Typically, the OEM or channel partner may work with a third party like ScaleUP USA to ensure that a proper campaign is developed and implemented. Typical impactful campaigns can cost upwards of $25K per channel partner per year and the developed program can have a shelf life of about a year — about the same cost of participating in a trade show but with year-round publicity and results! We at ScaleUP don’t like the “quick spend” techniques like a significant expenditure at a trade show. Such activity, unfortunately, does not build the relationship with the buyer (prospect) upfront, very critical for large B2B or B2G selling.
Alternatively, the OEM may distribute the Market Development Funds as a subsidy or a discount for the channel partner’s marketing and promotions expenditure. This is not recommended as the balance amount needs to come from the channel partner and that can constrain the proposed campaign unless the OEM needs to stretch their MDF and are willing to risk their share of the funding.
Finally, The other option is that the OEM enables a rebate or a payback after the channel partner has spent the money. We at ScaleUP USA are not fond of the rebate or a payback option at all — as you now have a problem motivating the channel partner to pay upfront first and then fill in the paperwork for reimbursement. This one is a loser!
Government Market Development Funds, Focus, and Clarity are Important.
While developing the MDF strategy, clarity of objective is critical for the MDF program designer. As a best practice you should ask the following questions while defining this program:
Why: Why are we deploying these MDF funds?
Who: Who will these MDF funded promotions target?
When: What should be the timing for this targeting?
Where: What is the geographic location or category of prospect targeting?
How: How can the MDF funds be used for maximum impact?
What: What will you exactly do with the funds?
Result: What specific result are you expecting from the program?
BEST PRACTICE #4: Based on ScaleUP USA’s assessment it is critical is these government Market Development Funds MUST deliver value to the OEM, the channel partner and the client or the government prospect. If the value equation for any of the three is not delivered, the marketing promotion will not succeed. It is, therefore, critical that the OEM ask and the channel partner submit a government MDF utilization plan. We typically can work with either the OEM or the channel partner or both to develop and implement this MDF program.
Traditional Government Market Development Funds Usage Models:
Traditional government marketing campaigns include email blasts, newsletters, social media, white papers, face to face events, webinars/webcasts, online presentations, research reports, blogs, articles, micro-sites, videos, advertising, and infographics.
BEST PRACTICES #5–11: Whatever you do use as your medium, here are some of best practices relating to the options:
#5: MUST DELIVER VALUE to the OEM, the channel partner and the client or the government prospect.
#6: STOP SELLING your company, product or services. Start educating and influencing the government prospect or client and build a relationship.
#7: INDEPENDENCE of the message and messenger matters to the government prospect. Use neutral brand to promote the story.
#8: TRUST BUILDING should be the major aim of the government MDF campaign. Trust building in your company, products, services, and the channel partners.
#9: LONGER SHELF LIFE is better. Quick start-stop activities like hosting events, and attending trade shows are costly and less impactful over a long run for government marketing campaigns.
#10: CONTINUITY IS CRITICAL. Build a government MDF campaign that will continue steadily, and grow over time by building on past success.
#11: MEASURES OF SUCCESS for government MDF program should be defined, measured, and reported on regularly.
Challenges in Government Market Development Funds Deployment:
As I mentioned earlier, During my long technology career, I had oversight of buying billions of dollars’ worth of technology products and services and therefore attended a large number of sales calls and promotional events. I recognized then that the large government organizations do not buy because of sales calls a seller makes, but because the large organization has an emergency, need, challenge or an opportunity and they are convinced the seller can address the problem successfully (think trust). Unfortunately, making the precise match between the exact buyer problem and the needed seller solution is very difficult so market development is key too.
BEST PRACTICE #12: We suggest you focus on how “organic problem solving” happens in large organizations and then focus on educating the problem solvers, influencers, and decision-makers early and often how your company can best solve their problem using digital “edusales” means. The digitization of business development is happening. Don't get left behind.
Start by digitally building internal champions, create communities of interest and connect with them to your company, products, and services. You must become your government buyers trusted advisor even before you ever speak to them!
In the process, you will get the much-needed government exposure, brand awareness, and timely business leads for your company. This is the core focus of “buyer-driven sales methodology” discussed in the ScaleUP USA’s Corporate and Government Sales Acceleration program.
About the Author:
Nitin Pradhan is an educator, technologist, and social entrepreneur based in the Washington DC metro region. He is the former award-winning CIO of the US Department of Transportation and an Obama Appointee. He leads the ScaleUP USA’s Digital Growth Accelerator including their Federal Business Accelerator, the Federal Career Accelerator, and the Career Trajectory Accelerator. He also advises Career Trajectory Live and All GSA programs. Business and government leaders can connect with him on LinkedIn.
