Managing development funds

When it comes to market development funds (MDFs), where will I get more bang for my buck? Should I give funds to the partner to spend on programs it develops and produces, or should I determine which marketing programs would be best for my channel partner? What are vendors doing now to make market development funds easy to manage and valued by the partner? 

-- Debbie, IT Security Company 

Divided over handing over funds or micromanaging MDFs

As the economy contracts, managing market development funds (MDFs) has become a priority for many vendors. They are scrutinizing every marketing dollar. But manufacturers are still divided on how to leverage those dollars to get the best return on their investment: Should they give funds to channel partners or take a more hands-on approach and micromanage the marketing efforts?

Readers have mixed feelings on this subject. But the majority of them feel it's important to have a plan and carefully track these marketing dollars. Their responses fall into three main suggestions:

• Never hand over funds unconditionally.

• Plan for your MDF program quarterly or per project.

• Dedicate one person for tracking these funds.

Never hand over funds unconditionally

Never, never, never unconditionally hand over funds to channel partners. One reader, Linda, an IT channel director from Scottsdale, Ariz., says, "Never turn over funds to a partner you aren't involved in developing programs with." From her experience, when budgets are tight, turning over funds can cause them to end up on the product distributor's bottom line, rather than in its marketing program. That's why it's important to have an MDF plan, and tie the funds directly to marketing strategies/tactics.

Plan for your MDF program quarterly or per project

Other respondents aren't as emphatic when it comes to doling out MDFs to channel partners, but they consider a plan important. Some vendors or manufacturers determine their promotions strategy on a quarter-to-quarter basis. Keep in mind that market development funds don't equate a bailout. "It depends on the product launch or if the vendor needs to blow out its inventory," says Joe, a marketing director at a software company in St. Petersberg, Fla. Managing inventory levels should be a top concern for vendors in this economy, he says.

On the other hand, a director of channel sales doesn't see much benefit from instituting a regular MDF program. "My company handles opportunities on a one-off basis," he says.

Since it's more expensive to keep excess inventory, vendors have been pushing merchandise as fast as they can, Joe adds. For instance, he's seeing many offers for direct rebates, in addition to buying one product and getting another one free or something extra. "Fund management should be about moving inventory quickly."

Dedicate one person to tracking these funds

Managing funds is a complex issue. The challenge depends on the number of channel partners and the complexity of promotions, says Sally, a marketing manager in Trenton, N.J. The strategy depends on the manufacturer's size, she says. "Depending on the size, the vendor may have to dedicate a person to track and manage the funds, or the vendor might have to find an outside service with people experienced in managing funds and promotions."

Many respondents stress that a one-size-fits-all approach won't work with fund management. Vendors need to be flexible with clients.

Linda sums it up nicely, "When the type of program that vendors choose considers market conditions and brand strategy, vendors will get the most bang from their buck."