Any business that uses third-party service providers will attest to allocating some resources to carry out their activities smoothly and efficiently. This type of funding is called Market Development Fund (MDF), and its purpose is to increase sales through effective marketing. However, MDF should not be confused with Co-op funds since the latter is only concerned with handing out incentives. If you’re ready to begin reimbursing partners to execute training, marketing, and sales initiatives, learn more about MDF funds from Workspan. Following are all the basics you need to know about MDF.
Market Development Funds:
MDFs are given to a channel partner who uses them to market your product and increase its sales. There are two types of marketing development funds;
- Monetary: A specific amount of money is allocated to a channel partner who is asked to use them to enter new markets and devise strategies to improve product sales.
- Knowledge-Based: A business relays information about its product and operations in this type. Customer data and other information are also shared to improve marketing strategies and implementation.
Regardless of the type, MDF’s only aim is to improve a business’s sales and profits. Both these resources are used to help a channel partner achieve their goals. A channel partner has to request the vendor for MDFs. Usually, they will prepare a report of how and where the money will be spent and its results. If the vendor is satisfied with the presentation, funds are released.
Payment Timings:
There are different ways and times allocated funds to a third-party service provider. You can award them funds in incentives and other monetary perks once a specific goal is achieved. MDF’s can also come in the form of rebates or a fixed amount which is agreed upon at an earlier stage. Therefore, no matter the timing of the payment or condition, it is considered a market development fund and is also used. However, companies prefer giving such finds in the middle or after the job and never initially. It is done so to maintain the cash flow of the business.
Documentation:
It is the responsibility of a channel partner to keep the proper documentation of market development funds. You should receive such information weekly or monthly, depending on your preference. Good documentation also helps you keep track of your money. The report should also detail lead generation, orders completed, expense sheet, and all the activities done through MDF money. Failure to document or report the expenditures can damage your business and the channel partner.
Refunds:
There will be some funds left once the job is completed in most cases. Usually, they are sent back to the business owner, but they can be again allocated for a new job. Again, this is up to the vendor to make a choice. The remaining funds can also translate to incentives for a channel partner if the owner is happy with a channel partner’s performance.
Investing in a business is essential for its continuous growth and stability. Market development funds are investments by nature that help your business find new markets and expand its operations.
