MDF isn’t new, the level of underspend is

When a 40% utilisation rate is considered a good thing it's inevitable that return on that investment will suffer, says Billy MacInnes

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A couple of weeks ago, I wrote about the subject of market development funds (MDF) and confessed that I was old enough to remember when MDF was introduced (although my memory does not extend to recalling the exact date of inception). What I can remember is that there was a degree of opposition from channel partners who viewed it as a means for vendors to assume excessive control of how marketing funds were used. There was also some grumbling about the extra layer of bureaucracy, administration and complexity involved with MDF.

Some of the more cynical elements in the channel saw it as a way for vendors to reduce the funding they made available to partners, as well as enabling them to direct it to suit their own agenda rather than the partner’s. Shocking, I know, but cynics will be cynics.

The weird thing is that when I wrote about MDF just a fortnight ago, that was probably the first time I’d done so in decades (yes, it really has been that long). I wasn’t necessarily expecting to wait as long to revisit the subject but it was reasonable to assume it wouldn’t be quite so soon.

But that was before I saw recent research from Omdia, quoted in a blog post by chief analyst for channels, partnerships & ecosystems Jay McBain, claiming roughly 60% of allocated MDF funds go unused every quarter and 43% of partners use less than half of their total MDF allocation.

Spare capacity

You might want to read that again while reminding yourself that MDF isn’t a new scheme that is still in the process of being assessed and assimilated by partners and vendors. MDF has been a part of the channel landscape for about 30 years or so. That makes it older than more than 3 billion people on this planet.

Seen in that light, 60% of MDF funds going unused is a big deal. And it begs the question: Why are vendors and partners still struggling to make MDF work when it has been around for so long? Let’s cut to the quick here, based on Omdia’s figures, if you were compiling a list of successful implementations of marketing schemes, how quickly would you have to drop the word ‘successful’ from the list before you could include MDF?

Surely, after all this time, it’s a very poor reflection on the efficacy of MDF that so much of the allocation is going unspent. Don’t forget, MDF was introduced by vendors to gain greater control over partner marketing spend which, you might assume, would deliver the quid pro quo of more effective use of those funds for better outcomes and thus, greater adoption by partners. Instead, as some warned at the time, it appears to have deterred partners by making the provision of marketing support more bureaucratic, complex and unwieldy.

Looked at from the outside, this does not appear to be a winning proposition for anybody. But is there an alternative? You’d think after so much time, the vendors would have done something to either make MDF more effective or replace it with a different way of doing things. To be honest, it’s a bit strange that they haven’t.

But then, perhaps we’re looking at those Omdia figures the wrong way around. Maybe they are what defines ‘success’ for vendors when it comes to MDF. To play devil’s advocate for a minute, if vendors have been reasonably sanguine about the amount of MDF funds being used and claimed for so long, maybe it’s because they’re comfortable with those levels. Perhaps, a 40% utilisation rate for MDF is considered acceptable. Might it come in handy, for example, if you have so much under-used funds sloshing around at the end of a quarter?

A couple of weeks ago, I wrote that getting the balance right between control over how marketing funds are allocated and the administration and complexity that comes with it, appears to be something the vendors are still working on, but maybe I was mistaken. Could this be the balance they’ve wanted all along?

It seems absurd to even ask that question but leaving aside outlandish conspiracy theories, it’s also weird to be asking why vendors and partners are still struggling to make MDF ‘work’ after all these years. By this stage, you could be forgiven for wondering whether the low utilisation rate is a feature of MDF rather than a bug. You might also wonder whether MDF might be more effective as an acronym for ‘messy distribution of funds’.

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