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A performance-based MDF program is the backbone of a stable and healthy distribution sales channel.
Performance-based MDF Program provides your company with the flexibility and workforce to reach end-customers in geographical locations and market segments that your direct sales cannot reach while validating their performance.
There are endless strategies to fuel your distributor’s demand generation workflow, but a channel-marketing plan without a performance-based foundation, which relies on a measurable return-on-investment from the output of marketing activity, is destined to come up short.
Performance-Based MDF Program Template (Checklist)
In terms of accelerating revenue and your bottom line growth potential, putting dollars into channel marketing is one of the best investments a company can make. However, the amount you spend should be in direct correlation with a given partner’s performance. With a surplus of opportunity to spend on marketing, there is far less to measure ROI. The following content is aimed to help guide your marketing spending, performance measurement, and the selection and prioritization of marketing tools to improve your bottom line.
Channel marketing funds are essentially broken into three categories:
- Co-op Program: Accrued funds that are based on generated sales; funds awarded to partners that are already performing.
- Fixed Cost MDF Program: A Manufacturer will give one of their customers $8000 dollars per quarter for marketing; this is not measured against POS performance.
- Performance-Based MDF Program: Funds issued in advance of sales – the manufacturer provides rebate incentive if their partner performs in a certain way; for example; they will get a 2% rebate every year if they $X amount of dollars. This is measured against POS performance.
However, channel partners were (rightfully) earning rebates based on their performance, but they weren’t applying those funds to their overall marketing engine. Consequently, manufacturers did not acquire an inadequate ROI on their incentives because channel partners were improving their margins, but not demand generation activities with end-customers.
Now, as a manufacturer, you likely can sympathize with partners’ preference in receiving accrual-based incentives. It is cold hard cash, and (for obvious reasons) is extremely appealing to your partner network.
In terms of Fixed Cost MDF programs, manufacturers utilized these programs to address the lack of demand generation activities, and it worked, to an extent. Although channel executives find these programs tactical and effective, they don’t necessarily inspire partners to perform on the financial side due to a “safety net” of funds automatically accruing. These programs essentially reward channel partners based on their existing business with manufacturers.
Finally, there are performance-based MDF programs, the most effective, motivational and compelling incentives to engage partners in demand generation activities while also focusing on revenue. Surprisingly, these programs (based on our CMR’s clientele) are also the least utilized out of the three, but also the fastest growing allocation method.
Performance-based MDF programs offer manufacturers the opportunity to generate the most revenue while also stimulating demand generation activities.
Implementing Performance-Based MDF Program to Improve Revenue & Repeatable ROI
A Performance-Based MDF Program accruals funds based on revenue generated and a trackable ROI criteria that stem from marketing activity. This program takes into consideration how well partners perform finically due to demand generation campaigns and strategies. Although the eligibility requirements require additional support and time on the manufacturer side, PP-MDF ensures your company has the greatest opportunity to win more deals as a direct result of marketing.
Understanding the MDF Program Structure:
- MDF Program: An official program where channel partners access rebates to fund demand generation activities.
- Allocation Process: A fair process (within your partner network) where any partner has an established ROI or offers to participate in PP-MDF.
- Documented Policies of Program Rules: The well-defined guidelines for earning funds (e.g., ROI metrics).
- Approval Process: A step-by-step workflow illustration of the submission, approval, and allocation process.
- Additional Funding: On top of standard allocation incentives, eligibility requirements for partners seeking rebates based on higher performance achieved.
The more objective your performance-based MDF program process is, the better ROI and higher partner adoption you will receive. Ultimately, a successful program comes down to two things: 1.) Transparency and 2.) Ready-access policies for channel partners.
When channel partners are left with subjective guidelines and approval processes (that are difficult to conceptualize), performance-based MDF program adoption will likely be low due to ambiguous logistics. The more unclear, the more partners will misinterpret the program and view it as “nonessential.”
There is a reason 25% of MDF rebates go unused it each. This statistic should be of major concern to manufacturers; not only because their investment in channel spending is excluded, but also because demand generation activity is dramatically limited. It’s a lose-lose for both manufacturer and partner, and the repercussions indicate a significantly lower opportunity to improve sales.
The more objective you make your performance-based MDF program, and demonstrate your commitment to growing your partner’s business, to more likely they will be to invest their dollars in your business.
Dispersing of funds and evaluating marketing performance is complex because there may not be a consistent set of definitions and protocols in place as used by the manufacturer, the partner, the partner’s account manager, etc. Establishing a consistent set of standards, along with a strategy to manage and track the success of your channel spending, will ensure that all of the logistics and personnel that go into your program are working in a synchronized order.
Following are tactics (i.e., metrics) you can use to help measure and justify your performance-based MDF program spending with channel partners. The key thing to remember is that they are quantitative metrics, not subjective scores that only take into consideration the longevity of a business partnership.
- Amount of Leads: Your PB-MDF should largely depend on how many qualified leads were acquired during the program timeframe. Well-designed programs define the amount leads by authority to be eligible for funding
- Sales Levels: You should have 5-7 stages within your partner’s lead scoring process, and each stage should contain a different value when funding is issued
- Pipeline: Top channel executives take into consideration the accumulated economic value of the partner’s entire sales pipeline
- Deal Status: Does partner have tactics tailored for each stage in the sales funnel?
- Deals Registered: The ultimate indicator of a successful program; final number of MDF’s contribution to revenue
Tying all of these elements together is the best strategy for creating a well-defined Performance-based MDF program. This can be accomplished if the rebates are aligned with the compliance guidelines for your incentives. Below is a sample template that correlates the MDF program’s goals with the quantifiable metrics above.
Process Flow of PB-MDF Funding:
- Channel partner requests funds
- Channel partner submits leads, sales funnel, registered deals, and ROI forecast
- Manufacturer reviews and approves funding based on program rules
- Channel partner pays their portion of the program to begin marketing activity
- Qualified leads are entered into manufacturer’s tracking system (e.g., PartnerPortal, CRM, ERP)
- Closed revenue is updated into manufacturer’s tracking system (e.g., PartnerPortal, CRM, ERP
- Manufacturer validates program and reimburses partner based on performance
- Manufacturer continues to fund channel partner’s marketing activity based on achieved leads and deals (revenue) closed
Each performance-based MDF program will be distinct and require different goals and objectives. To help your channel partners achieve your required benchmarks, it is important to enable them with the right resources, support, and tools to be successful. Remember, channel partners are often intimidated by marketing, and many times, lack the dedicated resources to execute marketing activity efficiently and effectively. That’s why it’s imperative for the manufacturer to set-up partners for success with specific investments for each aspect of the marketing/sales process.
Marketing/Sales Development Investments:
- Branding development: content marketing strategy, website optimization, inbound marketing, brand messaging, logo, tagline, etc.
- Sales Support: CRM software training, sales workshops, eBooks and best practices, etc.
- Sales Scripts: Tailored messaging for end-customers in each stage of buyer’s journey and/or sales funnel
- Self-Serve Demand Generation: Platforms for automated emails, co-branded content and social media content, to help initiated partners execute marketing campaigns
- Concierge-led Demand Generation: Full-service marketing services that create customized campaigns to generate, nurture leads
- Branding templates: Detailed brand guidelines (e.g., logos, usage formats, messaging, websites, third-party sites, etc.)
- Content: Syndicate your content directly to through partner’s marketing channels
- Sales Support Scripts: Readily available sales scripts for handling objections, disputes, roadblocks, customer service, etc.
- Outreach/outbound Scripts: Readily available sales scripts for making initial contact with prospect
- Leads qualification Scripts: Specific questions that qualify a prospect for each stage in the sales pipeline
If you have plans for channel partners to be self-sufficient in their marketing efforts, they should have easy access to the following tools within your portal. These tools don’t rely on full-service marketing concierge support, but rather, allow partners to take initiative without relying on you.
Self-Service Marketing Tools:
- Email: Partners should have access to email templates so they can set-up drip email campaigns, send product announcements, eBooks, white papers, news, offers, case studies, etc.
- Events: Give partners the opportunity to create landing pages for sponsored events that allow customers to easily sign up and attend
- Social media: Partners should have access to social media tools that queue content on various platforms automatically
- CRM: Provide partners with contact’s database to update leads status and organize prospects efficiently
Although marketing services provide a lost cost method for partners to conduct their demand generation efforts, they typically have a low adoption rate due to the time, money and complexity involved in its execution. Being as partners are typically small businesses with restricted cash flow, marketing (many times) will take a backseat to areas where partners are better in executing. With that said, if you plan to increase PB-MDF program adoption, you may want to consider employing full-service concierge options where partners can invest in.
Full-Service Marketing Options:
a) Marketing consultant: Specialists that develop lead generation strategies based on customer research, developing brand personas, understanding the customer journey (i.e., awareness, consideration, decision) and competitor analysis.
b) Copywriting: Customized content that positions partners in the best possible light, highlighting their specialties and conveying their value propositions
c) Lead nurturing: A multi-touch marketing service that is customized to individual end-customers
d) Lead qualification: Automated lead qualification services that match prospects with profile data so that partners can focus on highest lead value
e) Deal progression: Tailored services that take leads through a designed progression; sales walkthrough