Streamlining Processes, Accelerating Reimbursement Can Boost MDF Utilization

At the end of the last quarter — just like countless quarters before them — many vendors were probably sitting on a fairly significant portion of their MDF (market development fund) budget. Despite the value that many partners place on having access to MDF, much of the money that vendors set aside goes used.

Figures vary, but even at the low end of the estimates, partners are leaving a lot of money on the table. Indeed, while many companies featured in the 2017 CRN Partner Program Guide report that only 1 to 10% of their MDF funds go unspent at the end of each quarter, a number of them said that 10 to 25% of funds are unused. Worse, some companies noted that their partners leave 25 to 50% of MDF in the kitty each quarter.

According to a worldwide channel survey by ZINFI Technologies, as much as 60% of MDF goes unspent.

In an article posted on Through-Channel.com, managing partner Paul Yantus pointed to three primary reasons why partners don’t use all of the MDF available to them. The administrative burden is too high. Reimbursement of funds takes too long to support many partners’ cash-flow requirements. And equally important, many partners just don’t have marketing resources to take advantage of the funds available to them.

Lisa Masiello, president and founder, TECHmarc Labs, Inc., referenced her blog in a conversation with CMR. Like other channel experts, she attributed unspent MDF to the limited resources of smaller partners, their lack of marketing experience, or that they just have too much on their plates already.

Slow reimbursement also inhibits MDF spending. Even when partners hurry to complete paperwork for spending approval, they “are required to wait for long periods of time to receive funds/payments for complete activities,” Masiello said.

Complicated Processes Limit Usage

Sugata Sanyal, founder and CEO of ZINFI, pointed to similar challenges in a blog he posted last summer. For example, he wrote that because most channel partners do not have dedicated marketing resources, they are not aware of MDF requirements, don’t know how to apply for them and end up not using them even when they are available.

It’s not all the fault of the partners, Sanyal wrote. For example, vendors that have held back on investments in marketing automation platforms or concierge services are not able to provide partners with the support they need. “It is essential to give channel partners pre-configured campaigns that are pre-loaded in a channel marketing automation platform,” he wrote.

It’s also necessary to provide marketing concierge services to partners who are trying to grow their businesses but struggling due to lack of internal marketing services.

Mostly though, vendors need to be more strategic in the planning and allocation of MDF, said Sanyal in an interview with CMR. Vendors are often tactical with their through-partner activities, changing plans much too often for partners with small marketing teams. The majority of vendors, he said, “don’t have structured co-marketing plans in place. This simply creates more problems for the partners.”

Spending Options Boost Usage

Companies that do report good to full usage of their MDF tend to allow partners to use them for a wide range of activities. A review of the items that vendors allow partner to spend their MDF, as self-reported to CRN, reveals that partners have plenty of options to consider.

In addition to the most frequently listed items such as print and digital advertising, email marketing, and website development, partners can use MDF funds for virtual and in-person events, and staff training and certifications. Some companies will reimburse partners who invest in demo equipment.

Flexibility is key, said Michael Walsh, VP of Sales, at Arcserve, a provider of data protection and availability solutions. A 100% channel focused company, Arcservce encourages its partners to request MDF for a wide-range of activities. “The way we get to ‘yes’ with our partners it start with the concept that there are no ‘bad’ ideas,” Walsh said.

Vendors often tend to behave as if the planets revolve around them, he said. Partners are at the “center of our universe,” he added. Arcserve enables partners through a robust partner portal. The company also offers concierge services to ensure that partner questions are answered quickly.

Channel technology providers agree that many partners do need extra support. “Since many partners do not have dedicated marketing resources, they need to be supported by dedicated concierge services,” wrote ZINFI’s Sanyal. The primary focus of concierge services should be understanding the partner’s business to make appropriate recommendations on what will work for them. “Once this relationship has been established, utilization of market development funds will go up.”

Accelerating Reimbursement Is Key

At Through-Channel, managing director Yantus emphasizes that accelerating reimbursements of funds is crucial. “Most partners really can’t afford to have cash be out-of-pocket the 90 days it takes for costs to be reimbursed with MDF,” he told CMR.

To encourage more partners to utilize MDF, vendors need to streamline the submission and reimbursement processes. And what vendors need are solutions that give them the flexibility to easily create MDF programs, and make adjustments if necessary. “Vendors need the capability to monitor the adoption of their MDF programs and make changes if necessary,” he said. “If they notice that a program is going sideways, it needs to be easy from them to make updates.”

While Sanyal agrees it important to streamline MDF usage by all partners, he did suggest in his blog that vendors pay attention to the partners already working hard to optimize them. “It is essential to provide partners who are engaged and know how to apply funds and get paid with dedicated marketing services agency capabilities,” he wrote. As a result, they can continue to quickly apply funds and execute campaigns that are aligned with the vendors’ objective, adding to the value they already bring.