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Market Development Funds (MDF)

Market development funds (MDF) are a resource that a vendor grants to its indirect sales channel partners to help the channel with sales and marketing programs. The fund may be monetary or knowledge-based.

Marketers within channel partner companies use market development funds to support a range of initiatives. Planning, close coordination with vendor partners and follow-through on MDF-backed programs are considered important success factors. MDF is one source of vendor funding, with another being co-op funding.

Funding structures

A vendor may allocate financial incentives to a channel partner that has achieved a particular membership status, within the channel partner program, by meeting the vendor’s requirements in terms of revenue and/or certifications. The same vendor may also award financial incentives to a company that has been identified as a potential partner, capable of helping the vendor build business.

Knowledge-based resources may include leads and mailing lists or access to the vendor’s own marketing resources. For example, a vendor might provide a channel partner with prepackaged HTML marketing materials, bulk mailers for a direct mail campaign or tools for creating a webinar.

Market development funds: Examples of use

Channel partner companies may use market development funds to increase local awareness of their brands.

Specifically, partners may use MDF to launch a marketing event, lunch-and-learn events are a popular form of a client-facing educational program and one that partners may fund through MDF.

In addition, channel partners may use market development funds to defray the cost of sales leads or to support Digital Marketing and telemarketing campaigns.

Best practices

The task of obtaining MDF requires time and effort, so a channel partner should focus on a small number of important vendors — those that make a significant revenue contribution. The partner must learn the particular requirements and processes of the vendors’ MDF programs. This is where doubleBaRRiL comes in to assist with your plan, and application for these funds.

Planning is also important when applying for a vendor’s MDF. In the case of a digital marketing event, for example, it is recommended that channel partners provide the vendor with a simple plan of action that includes the ask (funding), the action (what the campaign will be) and the expected results (in terms of ROI). 

Channel partners also need to follow up on their MDF-backed activities. A partner should designate salespeople to pursue the sales leads generated from a marketing event, webinar or other programs. Partners must also follow up with the vendor that provided the MDF dollars. The partner should document the leads and closed sales stemming from an MDF-supported marketing campaign. This helps the vendor evaluate the effectiveness of the partner’s campaign, which inturn builds the case for providing additional MDF.

In general, demonstrating a commitment to a vendor and its products can help a channel partner obtain market development funds. To do that, partners can take steps to show proficiency in the vendor’s offerings and obtain the appropriate technical certifications. The partner may also share its sales pipeline with a vendor, highlighting the vendor’s contribution.

MDF vs. co-op marketing funds

Market development funds differ from co-op marketing funds. One distinction is that vendors usually grant co-op funds to high-volume sellers, such as distributors.

In addition, those funds are budgeted for a set amount and are used for longer-term marketing activities, such as annual campaigns. A vendor typically provides co-op funds to a channel partner based on a percentage of that partner’s product sales with that vendor.

In contrast, MDF dollars are generally used for shorter-term activities, such as webinars or Digital Marketing Campaigns. One similarity between co-op dollars and MDF is that both funding sources may be underutilized if programs are difficult to navigate or channel partners aren’t aware of them.