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, but are you using them in ways that hinder your partners’ sales rather than helping them?

The root of the problem is a tendency to view MDF as an expense and therefore something to limit and control. But, if instead, you begin to view MDF as an enablement tool, a way to provide incentives for the behaviors you’d like your partners to engage in, it can be an effective lever for increasing partner market penetration.

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 a Partner Relationship Management solution like Channeltivity makes it easy to tie together and measure deal registration and MDF use.

It’s also important to measure and track the effectiveness of MDF. So it’s an enablement tool but also a measurement tool. How is the ROI of your MDF? If you can answer that question, it means you’re improving your understanding of what partner behaviors most positively impact sales, and getting better at measuring the success of the channel. When you can understand what activities are effective, you can invest in doing more of those and less of what’s ineffective – and that’s the real value of MDF.