12 Best Practices for OEM’s and Channel Partners in Implementing a Market Development Fund (MDF)
The Insider Perspective:
In my 25+ years of technology career, I have worked in leadership positions in Federal (CIO, US Department of Transportation), State (MD, Virginia’s Center for Innovative Technology), and local governments (CTO role, Fairfax County Public Schools). During this time I have been “bombarded” with thousands of pieces of 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, frustrating both the seller and the buyer. More importantly, the marketing campaigns and promotions that companies do towards their clients and prospects are many times outdated in their approach and meaningless.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 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 marketing and advertising budgets are utilizing older methodology and tactics which do not work in the hyper-intensive, heavily multi-tasked 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 advertising and marketing is dead! Relationship building advertising and marketing is very much in vogue! Change your campaigns or be left behind.
Best Practice #1: Build marketing and sales campaigns based on buyers needs and not sellers perspective of the 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 advertising and marketing campaigns and wasted. What if we could use some of the best practices to improve their impact so all OEM’s, channel partners and buyers get the results they seek? That is what we focus on in ScaleUP USA’s Learning Academy with NBC4 program and ScaleUP USA is here to help OEM’s and Channel Partners plan and execute such MDF’s and effective relationship based marketing campaigns.
MDF’s Vs. Co-Op Funds:
Before we get into details of best practices in Implementing 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 MDF’s generally work better than 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.
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 channel partners past success criteria (peak performer, average performer, and low-performer).
BEST PRACTICE #3: Typically the 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 marketing campaign or else a half baked marketing program will emerge which will benefit no one.
Typically, the OEM or channel partner may work with a third party like ScaleUP USA/NBC to ensure that a proper campaign is developed and implemented. Typical impactful campaigns that ScaleUP USA/NBC can cost upwards of $15–25K 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 partners 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 pay back after the channel partner has spent the money. We at ScaleUP USA are not fond of the rebate or a pay back option at all — as you now have a problem motivating the channel partner to pay up front first and then fill in the paper work for reimbursement.
MDF Clarity is 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 Market Development Funds MUST deliver value for the OEM, the channel partner and the client or the 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 MDF utilization plan. ScaleUP USA typically can work with either the OEM or the channel partner or both to develop and implement this MDF program.
Traditional MDF Usage Models:
Traditional 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: What ever you do use as your medium, here are some of best practices relating to the options:
#5: MUST DELIVER VALUE for the OEM, the channel partner and the client or the prospect.
#6: STOP SELLING your company, product or services. Start educating the prospect or client and build a relationship.
#7: INDEPENDENCE of the message and messenger matters. Use neutral brand to promote the story. We use our partner NBC.
#8: TRUST BUILDING should be the major aim of the 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.
#10: CONTINUITY IS CRITICAL. Build a campaign that will continue steady, and grow over time by building on past success.
#11: MEASURES OF SUCCESS for MDF program should be defined, measured, and reported on regularly.
Innovations in MDF 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 organizations do not buy because of sales call 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. Unfortunately, making the precise match between the exact buyer problem and the needed seller solution is very difficult. Therefore, NBC and ScaleUP USA have jointly developed an innovative, scalable, affordable and impactful solution to this problem and we would like to pilot it at your organization.
BEST PRACTICE #12: Our online program mimics at scale how “organic problem solving” happens in large organizations and focuses on educating the problem solvers, influencers, and decision makers early and often how your company can best solve the problem. We help you build internal champions, create communities of interest and connect with them to your company, products, and services. You become your buyers trusted advisor even before you ever speak to them! In the process, we provide you much-needed exposure, brand awareness, and timely business leads for your company. We can work with the OEM’s, channel partners or both. Enroll for our free online program to learn how.
If you like this article, we will appreciate “clapping” and sharing the story on your Twitter and Facebook accounts!
About the Author:
Nitin Pradhan is the former award-winning CIO of the US Department of Transportation, and a first term Obama Appointee; He is the current CEO of Launch Dream and leads their ScaleUP USA — Digital Business Growth Accelerator initiative and is also Managing Partner of GOVonomy, an innovation as a service for governments and government contractors. He is also a Mentor at Mach 37, the nation’s top Cyber Accelerator, Z-nation Labs (India), and on the External Advisory Board of Accenture. Business and Government leaders can connect with him on LinkedIn or follow him on Twitter.