Entrepreneur

Optimizing MDF for Your Partner Sellers

By Kris Blackmon, chief channel officer, JS Group
March 11, 2021
Optimizing MDF

In short:

  • Running a winning MDF program requires closely tracking investments and ROI — and therefore living in your CRM.
  • Partners need skin in the game: The purpose of MDF is to supplement their marketing and sales activities, not fund them completely.
  • Build clear process templates and turnkey offerings that will simplify your program for both you and your partners.

So, you’ve set up an indirect sales channel. The next step is to make marketing development funds (MDF) available to your partners, as an element of your partner program. MDF will equip partners to generate as much revenue for your organization as possible.

MDF comprises the financial compensation and other assistance which you give to your partners to help them with marketing and sales efforts. In some cases, it refers to content, lead generation and other programs you pay for in-house, the results of which you pass on to the partner. There’s still a cost for these efforts, which you’ll measure granularly so that you can quantify the indirect financial help you’re providing to partners.

Channel partners use MDF to support efforts including demand generation, technical certifications, sales training, inbound marketing assets and travel to events or to close prospective sales.

indirect sales

The Tech Entrepreneur’s Guide to Winning With Indirect Sales: A note from Captain Obvious: Before you deploy MDF, you’ll need to build an indirect sales channel. Here’s how to set one up.

Setting Up an MDF Program

Partner-related considerations:

Before you begin creating your MDF program, clearly define the specific partner type your program and sales model are targeting. While you may be focused on smaller businesses, for example, various partner types within that market will be at different levels of maturity in terms of digital marketing capabilities, training capabilities and sales strategies.

For example, a 10-person hardware reseller probably relies heavily on existing relationships for new business through word-of-mouth referrals and networking — and therefore may not have devoted much time to optimizing its LinkedIn profile, training in social selling or creating digital assets. A 10-person digital marketing agency, on the other hand, will have sophisticated inbound marketing capabilities, a robust and optimized web presence and a repository of demand-generation content. The hardware reseller therefore may need more help in taking a marketing-qualified lead (e.g., a lead that could become a customer) to a sales-qualified lead (i.e., a potential customer who’s plausibly ready to buy).

Financial considerations:

A fully-fleshed-out partner program that delivers significant results requires investment in your partners’ success. It should go without saying but bears emphasis: When your partners succeed, you succeed. You want them to have effective digital marketing campaigns, advanced training and sales enablement tools that help them close the deal.

Any MDF program will provide ROI. The simplest way to calculate this is:

MDF formula

Here’s an example: Say a partner needs to increase the amount of MQLs coming into its funnel in order to hit a $20,000 opportunity in one quarter. You and the partner determine that in order to hit this goal, you need to achieve 300 MQLs in one quarter — either MQLs that the partner generates through joint marketing efforts or ones that you generate and pass on to the partner. Either way, you’ll have a cost per lead.

This partner identifies that in order to drive this number of MQLs, it needs digital content in the form of webinars, whitepapers and case studies, which you may develop in-house at your own cost and share with the partner. As your MDF program gains steam, you’ll be able to more accurately estimate the partner cost per lead, per marketing activity. At first, though, you may need to estimate based on your previous experience, industry data and your partner’s insights. Let’s say that, from your own experience and conversations with partners, you determine the average cost per lead from this content marketing campaign will be $100. This adds up to a $3,000 total investment.

But don’t carry the entire financial burden yourself as a vendor. The goal isn’t for you to become your partners’ marketing department, but rather to give them an assist in their own marketing efforts. Most vendors offer MDF funding of about 25-50% of the actual cost of a given marketing or sales activity, depending on the activity’s estimated ROI. In this case, let’s say you split the cost with the partner. If the $1,500 you invest in its content marketing campaign actually results in the $20,000 revenue goal, then according to the formula above, your ROI would be about 12 times.

measuring returns

The Ultimate Guide to ROI: Measuring returns is critical in evaluating potential investments. We’ll break down ROI and six other measures for gauging performance.

Foundations of a Winning MDF Program

An internal team

First, you need an internal team to manage your program. Ideally, you’ll have separate marketing functions for your direct and indirect sales channels; dedicated channel account managers (CAMs) that work with partners to close sales; and a program office to manage the program’s nuts and bolts. At first, you may decide to outsource these functions — but again, your goal should be to eventually build a department just for your indirect sales team.

A tracking system

You must have system-level tracking to monitor marketing’s contribution to revenue. This means a tight integration between your and your partners’ CRM systems.

Many smaller partners won’t have a robust CRM — in some cases, they may not have a CRM at all. If this is the case, then one of your partner program management department’s first investments should be helping these partners build out, train on and consistently use an automated CRM that integrates with your own. (And if YOU don’t have a CRM, stop reading and start researching. You’ll need a good one.)

“Invest considerable resources into your CRM,” says Heather Murray, VP, transformation & customer journey at indirect IT distributor Tech Data. “It’s expensive, requires maintenance, requires attention to detail and requires everyone in your company to buy in and use it. Don’t count on your partners having a robust CRM or the capabilities to track and manage leads.”

Repeatable processes

Your MDF program shouldn’t operate on an ad hoc basis. Work from templates and repeatable processes for submissions, ROI forecasts, performance measurement and payment receipt. Automation of sales and marketing is essential here; manual processes are more error-prone and less accurate than repeatable, automated ones. As a result, you’ll have a harder time comparing partners’ success levels.

Commitment to measurement

Vendors typically gauge whether a partner is effectively using MDF by reviewing the specific activities they perform and the resultant metrics.

For example, let’s say a managed service provider (MSP) wants to use MDF for an email lead generation campaign. When the MSP submits its campaign costs for MDF reimbursement, it should document efforts like:

  • the number of emails sent
  • open rate
  • the number of call-to-action conversions (e.g., downloading a piece of content)
  • the number of leads that result in an inbound call
  • the length of those inbound calls
  • whether those calls convert an MQL to an SQL

Then, of course, you should measure the outcome in terms of:

  • number of qualified leads generated
  • number of leads closed
  • revenue that each closed lead generates

Your partner will submit its marketing or sales activity for MDF reimbursement through your CRM, thoroughly documenting costs with all third-party invoices (in the above example, the cost of the email automation software or creation of content marketing asset) and proof that it used the campaign to promote your product or service (e.g., a copy of the email and its CTA to download your whitepaper).

Partner incentives

Partners gauge their vendor profitability by commission or discount (margin); the cost of the program, including certifications and meeting program requirements; and the internal costs of making a sale, such as how many calls a salesperson makes or how much support marketing provides. When doling out MDF dollars, vendors might assume they’re doing all of the heavy lifting — but as we just noted, partners allocate resources of their own to the sale. Stay keenly aware of this, particularly when working with smaller partners.

Some vendors “gamify” their MDF programs: When a partner makes a sale, it earns points to spend on MDF elements. The approach helps vendors ensure they’re investing MDF in the partners that actually generate revenue, says Amy Bailey, senior vice president of marketing at master agent Telarus.

In the past, her firm “found that a lot of times we were spinning our wheels, because we were spending time on [partners] who weren’t necessarily doing business with us,” says Bailey. “They’d use all of our marketing resources, and then the order would go to one of our competitors.”

“We finally said, ‘This is ridiculous. We’re not going to offer these free services; we’re going to put them behind a bit of a gate,’” she continues. Now, “once the partner gets to a certain level, then they get those services essentially for free. We’re rewarding their loyalty.”

With a new partner program or MDF program, be prescriptive in order to better manage the metrics. You can build more flexibility as you grow your partner base. Consider “MDF-in-a-box” programs that package options, prescribe expected ROI, clearly define the partner and account manager responsibilities, and lay out timelines and deliverables. Make the partnership as turnkey as possible, to reduce the burden on both parties.

MDF Program Expectations and Needs

Partners expect:

Low-cost leads

Partners want programs that fill their funnel with warm leads. They also want programs that cost them no money or that reimburse them for the cost of those leads — so, prior to buying in, they need a clear understanding of which costs they can and can’t submit for reimbursement.

Easy wins

Partners want opportunistic programs, those that require as little work as possible. After all, they have a business to run. Make sales and marketing activities as easy as you can for them.

Activities that make sense

Partners appreciate activities with achievable goals. Don’t ask them to engage in a robust social selling program, for example, if their LinkedIn profile has yet to be optimized. Ask: Does the partner have the capabilities to perform your proposed activities?

Sufficient lead time

Critically, partners want to receive opportunities with lead time. They need a program that’s made available early enough to fit into their next-quarter plans. So, give them enough runway to achieve your joint goal. Don’t tell them, for example, to spend $10,000 in two weeks on a segment in which they aren’t already active. You may be eager to spend at the end of a quarter, but partners need time to ramp up their resources and strategy. Some need help with top-of-funnel motions like converting prospects to leads, and some might be more focused on closing deals as part of a renewal campaign. Have you given the partner enough time to achieve desired results?

Sufficient funding

When partners look at their own ROI, they want to know first and foremost whether your MDF is enough to actually fund the work. This may require careful analysis and planning with the partner and your account manager in the form of a quarterly business review (QBR) or, if you’re a high-achieving vendor, a monthly business review.

Communicating With Partners

Place higher value on partners that proactively communicate with your team, says Bailey. If the vendor is doing all of the outreach, it creates an imbalanced relationship. If partners are asking vendors about business development strategies and where they need help, on the other hand, it shows they’re invested. Encourage this behavior.

“If a partner is calling into the vendor, it totally changes the nature of the relationship. It makes a relationship more of a two-way street,” says Bailey. “So if partners are reaching out to vendors, talking through those leads and opportunities, asking what a specific scenario might look like or newest product releases to promote ... their stock [should] go way up with that vendor.”

Vendors need:

Involved relationships with partners

As a vendor, you want the MDF portion of your channel program to teach the skills partners will use to sell and manage your products and solutions. You want to deepen engagement with your organization over and above just one MDF activity.

In other words, don’t just hand off leads. After a lead gen campaign is over, have your account managers follow up to ensure the partner is working these leads and getting the support it needs to close the sale. Define the specific programs and segments that are important to your organization so you can home in on your target markets. And most importantly, work closely with your finance team so it can measure investment accurately.

Evaluation of partners

Before investing MDF in each partner, ask whether the partner has the people, tools, time and cash flow to meet the sales or revenue benchmark you’ve set by the anticipated date.

Also confirm the partner is committed to selling your products or services: Is your brand mentioned on its website? Is the team sharing your content on LinkedIn? Are they asking for training on your offerings and how to sell them?

Finally, define internal benchmarks a partner must meet in order to qualify for MDF. Is the partner committed enough to your business to be successful with the campaign? Does the partner target the right segments, and is its team trained? Can they qualify and close the sale?

Making an MDF Plan of Action

Once you’ve identified your internal goals, templates and expected spend, turn to your partners.

Your channel account managers should be conducting those QBRs to define revenue goals, sales metrics and marketing strategies, along with desired results. No more than a week after the QBR, they and the partner will quickly put together an actionable plan that outlines the needs and expectations of both parties. At this stage, identify not only realistic sales targets but also the gaps the partner needs to bridge in order to reach those targets. Gap remedies may come in the form of training, marketing, capacity planning or sales support from you. Together with the partner, your account managers will set sales goals and ensure a fluid delivery of MDF elements through your CRM to facilitate the agreed-upon strategy. They’ll also define the expected sales funnel impact as a result of MDF investment.

Measuring MDF Results

When measuring success, look at quarterly metrics rather than annual. A quarter is enough time in which to gauge whether your MDF program is working, and it allows time to correct anything that might not be working. Metrics may take the form of sales and marketing funnel expansion, net new logos won or renewal business booked. Just as you defined your target partner at the start of this exercise, segment your metrics and goals according to the market you’re working with. And again, recognize that smaller partners will have different goals than those working with the public sector or midmarket. Clarify the expected ROI in each segment, with realistic expectations.

(Simple) Process Is King

All MDF proposals should require a prior approval (PA) request at least a week before the start date of each activity, which specifies the expenses that the proposed funds will cover. And each MDF claim for reimbursement should require an ROI proper proof of performance (POP) and, as mentioned, any third-party invoices involved in the transaction. Set an end date for reimbursement claims — for example, 45 days past the activity date. And require a full ROI estimate within 60-90 days of the initial claim date.

Just like any marketing campaign your direct team is executing, setting up and putting into motion an MDF program isn’t easy. MDF is complex. Every fine detail is critical, from contracts to tracking performance-based compensation back to results.

Organizations with nascent or not-yet-realized channel programs would do well to use third-party channel and/or marketing consultants, experts who have proven histories of successfully executing MDF programs, says Murray.

“I would never launch a [program] today and start with staffing a full marketing department,” she says. “You just need a solid leader who understands strategy, understands the business and isn’t afraid to roll up their sleeves to work hand-in-hand with an outside channel consultant to plan the administration and execution.”

There’s no need to overcomplicate your new program. Giant enterprises with long-established channel programs, like Cisco or Dell, have convoluted programs which often require partners to jump through so many hoops in order to access MDF that smaller or lower-midmarket firms don’t have the resources to even try. Keep your new program simple, and grow it only as you must.

Types of MDF Activities

Most vendors subsidize a few generally accepted MDF-qualifying activities. Some can stand alone; others require integration into a larger campaign. Understand the expected ROI for each activity and how it factors into the partner’s overall sales strategy.

Some examples:

MDF activity type Works “alone”? Funnel impact ROI level
Content/collateral development Not well; should be part of a campaign –All stages Typically high, but low if used alone
Outbound telemarketing No; needs an offer piece (e.g., content, invite to a local event) –Top of funnel
–Renewals
–Upgrades
High, with the right list
Digital advertising No; needs an offer piece (e.g., content) –MQL to SQL Medium to high
Sales training (e.g., social selling) Yes –Prospecting
–Top of funnel
–Mid-funnel
High; works across products, services and segments
In-person events No; needs content –Prospecting
–MQL
High to establish brand, lower for immediate sales
Virtual events No; needs content and a great list –Prospecting
–MQL
–SQL
Medium to high
SEO Yes –Prospecting High, though needs coordination across partner community and vendor organization

The Bottom Line

MDF can create a significant return on investment for your organization and your partners if used effectively, tracked carefully and measured via documented results. It will take time to get the program right, but with detailed planning, automated systems and consistent partner communication, MDF can pay real dividends.

Mark Bianco

For more helpful information from the Brainyard and our friends at Grow Wire and the NetSuite Blog, visit the Business Now Resource Guide.

  

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