MDF an exercise in box ticking over thinking outside the box
True confession time: I’m old enough to remember when MDF was a new acronym. Not the wood thing, aka medium-density fibreboard, I hasten to add. I’m not that ancient. No, the MDF I’m talking about is marketing development funds. Believe it or not, there was a time in the not too distant – okay, the fairly distant – past when there was no such thing as MDF.
But that was then, this is now. The thing about MDF is that, if managed and administered properly, it can be beneficial for the vendor and the channel partner (be that distributor or reseller). Christine Lynn, head of marketing at Exertis Ireland, sums it up well when she says the objective of MDF is “to help drive demand, increase brand awareness and generate additional revenue opportunities, so it makes sense to maximise the investment wherever possible. Full utilisation of MDF also benefits IT resellers who may receive funding support for their own marketing activities and customer campaigns. When used effectively, it can create value across the entire channel”.
But the thing about MDF is that it’s a very targeted method of allocating funds to channel partners. And although every vendor has an MDF programme, they have very different guidelines and Ts&Cs for how those funds should be allocated even if, as Lynn notes, they typically follow a broadly similar approach.
Some vendors maintain relatively consistent MDF allocations, while others “operate highly target-driven models where failure to achieve specific objectives can result in little or no MDF being allocated”. This can create challenges around forward planning, she says, because distributors “are often unable to accurately forecast what level of funding, if any, will be available. In turn, this impacts our ability to commit to supporting IT reseller marketing activities too far in advance”.
There might also be occasions where MDF goes unused because deadlines for claims have been missed. “Vendors typically operate with strict execution and claims deadlines and, in most cases, there is very little flexibility if those deadlines are missed,” Lynn observes. Distributors managing large MDF allocations can also struggle to implement all activities within the required timeframe, particularly if campaigns are delayed, approvals take longer than expected, or priorities shift during the quarter.
Even back in the way back when, the ‘use it or lose it’ aspect of MDF was not something the channel was especially happy about. Nothing much seems to have changed in that regard.
One constant bugbear with MDF has been that programmes can be administratively demanding and unnecessarily complex. Lynn gives the example of an unnamed vendor that reviewed its internal processes and found that “a single campaign could involve approximately 90 individual touchpoints throughout the approval and claims lifecycle”.
She says there was a trend away from flexibility by some vendors a few years ago but they are starting to recognise the need to simplify their MDF processes again. “There has definitely been some positive movement in certain areas,” Lynn remarks, “particularly around faster approvals, simplified claims processes and a greater focus on outcomes rather than excessive governance”.
But there are still some vendors that have a fairly rigid approach where the processes can feel “overly complex, heavily administrative and slow to adapt to the realities of modern marketing and channel engagement”.
Complexity and concern
Perhaps complexity is a necessary side-effect of a more targeted approach but in an industry that makes a fetish out of speed and agility, it feels a little bit counterintuitive. While the system it replaced where partners could spend the money more or less how they pleased may have varied from vendor to vendor, it was much simpler because the structure was more or less the same for every vendor, the only variable was the actual numbers. It’s not that these issues weren’t raised at the time (you’ll have to trust me on this) and there was definitely some concern about vendors having such tight control over how the funds were allocated and for what purpose.
But here we are and as Lynn acknowledges, there is “no magic formula” for getting MDF right. As an aside, if the expectation is for a “magic formula” rather than a simple one then that’s probably an acknowledgement that there’s work to be done to make MDF as effective as possible. For now, every one just has to work out how to make each vendor’s particular scheme work best for them.
There are some things you can do, Lynn says, such as planning ahead so you have a clear view of what you will spend the funds on, keeping a close eye on day-to-day activity and processing and claiming activity “as soon as it’s completed rather than leaving everything until quarter end, when things tend to become busier and more difficult to manage”.
She adds that partners should try not to let the process and compliance of MDF “completely stifle creativity. Most marketeers are creative at heart but sometimes MDF programmes can kill that creativity and result in box ticking rather than thinking outside the box. The most effective programmes tend to strike a balance between structured execution and thinking differently about how to engage customers”.
Perhaps the box ticking conformity was to be expected. After all, taking a risk when you could end up with little to show for your creativity is not likely to be attractive to most partners. Uniformity in approach can be its own reward. In any case, if the vendor maintains a tight control over the direction and content of marketing activity, it’s not going to reward someone for being innovative but risky with its brand.
Control is the primary factor here. MDF programmes gave vendors more control over the process of allocating marketing funds to the channel and how they were spent. But control, of necessity, also brings greater levels of administration and complexity with it. Getting the balance right appears to be something they’re still working on.
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