Market Development Funds - How Channel Partners Become Your Best Allies

A manufacturer providing a Market Development Fund (MDF) program would seem like a perfect solution for the company and its dealers, right? It's a cooperative endeavor that supports channel partner marketing campaigns to generate demand and a greater return on investment than what each company could have achieved on its own, yes? So why, then, did I hear this from one of our heavy equipment manufacturing customers - "We had MDF programs for years for co-op advertising, direct mail and other initiatives. But, we finally stopped. We couldn't take it anymore. It was too painful for us and our dealers."

Too painful? How can a program designed to help both manufacturer and dealer be too painful for both parties? The answer is that if MDF programs are not structured well they can be a nightmare for everyone and create channel conflict, rather than synergy. But there are ways to design and manage these programs that generate cooperation and allow your channel partners to become your best allies in your marketing efforts.

Channel Partner Marketingr
In their simplest form, MDFs pay dealers to advertise the products and services of the manufacturer in their territory. MDFs are commonly used for yellow page advertising, billboards, direct mail campaigns, local trade shows, and co-branded collateral. The strategic benefit of MDFs over other forms of advertising stems from the belief that both the company and the dealer can achieve their business goals more efficiently by working together to fulfill customer needs. Companies develop MDF programs based on their marketing needs. They allocate funds for specific products or markets they are targeting, and they structure the program to pay for efforts they feel are likely to drive sales.

So what's wrong with this? It sounds like a beneficial way to share resources and increase exposure. Sometimes it is. But other times, an MDF program can quickly become problematic for both the manufacturer and the dealer. How? Failure stems from how they are created and how they are administered. There are two main causes for the failure of MDF programs.

Creating MDF Programs in a Vacuum -- Creating an MDF program without initial dealer input and involvement is an almost sure way to fail. If there's no buy-in to channel partner marketing programs, there's no feeling of ownership. Manufacturers may know exactly what they want in their MDF program, but if dealers don't feel like they had some say in it, or worse yet, if it doesn't fit in with the dealers' marketing of the product in their territory, it will go unused. And even worse, the program will end up creating ill will and channel conflict.

Poor MDF Administration -- If the lack of dealer involvement in developing the MDF program doesn't kill it at the start, the partner management and administration of it usually will. Many programs are too complicated, too burdensome, and too onerous. Most companies, even large ones, use a manual process for submission, approval, and payment. Dealers don't usually have the personnel or patience to run the gauntlet to get approval and get paid, so they ignore the program completely. It simply isn't worth it to them.

A Partnership Relationship Management (PRM) System Can Helpr
But there is hope. Some companies today do operate successful MDF programs. Most of these use their Partner Relationship Management (PRM) system to create and manage them. A PRM system is web-based channel management software that unifies all facets of managing a dealer network into a single partner portal. An effective PRM solution can help the manufacturer in both creating the program with dealer input, and administering the program efficiently.

Creating an MDF program using a PRM System -- Creating a successful MDF program involves dealer input, communication and buy-in up front. A Partner Relationship Management (PRM) system with a Collaboration component makes this a much easier proposition. Using internal forums, blogs and other communication tools, dealers quickly see that the manufacturer is listening to their input. Manufacturers still have to reach out to dealer councils and other groups to obtain ideas and buy-in, but open communication in the form of visible forums makes this much easier. Offering a formal collaboration tool in a PRM significantly improves the communication process and makes it easier for the program to be designed to benefit both the manufacturer and the dealer.

Administration -- Administering the MDF program within the PRM system is much more efficient than a stand-alone system because the components of dealer management are already incorporated into the PRM and can be blended with the MDF module. Dealers can create their own materials in the system. Automatic approvals can be set up since brand violations are avoided. The payment process can be automatic and timely. New programs can be added quickly since the back-end structure is already in place. On-the-fly reporting and tracking is easy with the internal dashboards that are available. Overall, administration is much easier for the manufacturer and the dealer.

MDF programs can work. They can be successful in selling more products. With dealer involvement in their design at the outset, and a Partner Relationship Management (PRM) system administering it, MDF programs can be a true win-win for manufacturer and dealer. Make your dealers your best allies by letting them do what they do best - help them market your products in their territory - but make it easy.