The problem with Market Development Funds in the IT channel

Gemma Telford from The IT Marketing Agency offers her opinion on vendors sharing their market development funds (MDF) with distributors.

In a post on the IT Marketing Agency’s website, Telford argues that when £100,000 is broken into chunks, which are split across a number of partners, "several things are unavoidable, including diminishing returns".

"Firstly: You’ve created an ROI tracking nightmare," she said. "If you speak to an experienced marketer in the distribution space, they’ll be likely to cite as their number one issue the lack of action and feedback on leads. This leaves you being able to track the expenditure, possibly the activity, but not the results.

"Secondly: When your pot of £100,000 is split, let’s say evenly across two to three distributors, it obviously becomes £33,000 to £50,000. Still a sizeable budget. But is it? Bearing in mind that distributors make money on monthly activities, the amount actually spent on marketing is already probably being halved.

"Now comes the allocation of MDF across the key partners. And what, exactly, constitutes key? Provision of funds based on revenue? Relationship? Longevity or previous ROI? You need to know and here’s why. Your pot of £50,000, assuming a 50/50 split across two distributors, is going to be spread across a number of partners of varying degrees of reliability in terms of execution and reporting."

Telford goes on to argue that a vendor’s fund can be diluted across several partners, which means it may not generate the interest a brand needs to build a pipeline and ROI.

"If you extrapolate that across your various buckets of MDF, split across your partner community, you’ve a whole lot of spend, a big bunch of management overhead, and an enormous risk around your investment," she added.

"Now, if your KPIs state that all you need to do is allocate the funding, well, I guess you’re golden! This though, is unlikely, and at some point the ROI question will arise."

Gemma Telford is MD at The IT Marketing Agency