The use of Market Development Funds (MDFs) has proven to increase sales through the channel, but they must be deployed intelligently. Distributing market development funds without good data to justify the expenditure may result in a waste of resources and a decrease in channel sales. No company wants to spend money on initiatives that have no hope of generating additional revenue. If your company uses MDFs to support its indirect sales channel partners and boost sales through the channel, you need a way of easily measuring the ROI of your MDF program.
What are Market Development Funds (MDFs)?
If your company doesn’t already employ market development funds to support the members of its dealer network, here’s a quick primer: a market development fund is money a manufacturer gives to its indirect sales partners to help them market their products at the local level. MDF programs have been used effectively for:
Advertising (billboards, yellow pages, newspapers)
Direct mail campaigns
Extraordinary investments (i.e. development of specialized support tools)
Conferences and trade shows
Because the manufacturer benefits when its dealer partners sell more of its products, it is clearly in the manufacturer’s best interest to support its dealers’ marketing efforts. However with limited funds available, marketing must be targeted toward areas with the potential for the highest return on investment (ROI) and toward dealers that you trust will ensure your marketing dollars are well spent.
Making Smart MDF Decisions
A good MDF campaign conveys product benefits to buyers and directs them to dealers to buy it. How can you ensure your target market will respond well to your marketing efforts, and that your dealers are prepared to close the deal?
Unfortunately, MDFs can generate friction amongst members of your dealer network. Dealers want access to market development funds to help increase their sales, and understandably get frustrated when they can't access funds they feel they have a right to (or when another dealer receives them). When market development funds are in play, dealers must:
Understand the goal of the MDF program.
Know the criteria for qualifying for the funds.
Know how to apply for market development funds if they qualify.
To avoid channel conflict caused by the use of market development funds, targeted communication through the indirect sales channel is vital.
Using a PRM System to Plan and Measure MDF Success
For maximum ROI, an MDF program must be conducted intelligently. Marketing dollars must be spent according to data-driven analysis, and dealers must have a clear understanding of the program. How can you implement an MDF program that accomplishes those objectives?
Get a a partner relationship management (PRM) system. The latest PRM software can provide real-time data to manufacturers on the performance of their dealer partners. For partners, it’s a portal through which all their interactions with a manufacturer take place. Because communication through the most effective PRM software is role-based, channel partners will only receive messaging about market development funds for which they qualify, and will be easily able to apply for them through their portal. Manufacturers, meanwhile, can use the data available through a PRM system to plan MDF campaigns and measure their effectiveness.
Increasing Sales with PRM
It is a best practice to distribute market development funds using a partner relationship management system. This distribution on the part of the manufacturer to its indirect sales team to market their products on the local level enables sales partners to institute effective marketing campaigns, and is in the best interest of both sides. To read more about best practices for increasing channel sales, read our white paper on channel partners ,“How to Increase Channel Partner Sales” below.