MDF, Co-op And More: The State Of Channel Partner Marketing Funds In 2018

Every year, technology vendors allocate billions of dollars to help their channel partners promote their businesses and offerings.

Every year, nearly half of these funds go unspent.

At a time when channel effectiveness is tilting heavily, reaching a 95/5 ratio in some industries (as n 5% of partners are generating 95% of sales) and resellers are carrying fewer products than ever before (down to 12 from 16 last year), the question jumps out: why are partners not using these funds?

There are several reasons we’ll go through, including a shift in where funds are allocated, but first: what are these funds and how are partners using them?

What are partner marketing funds?

The majority of technology sales does not happen direct to the customer, it goes through “the channel”. Often that channel is a partner, a reseller, VAR or ISV whose business is to some extent built on providing services around a vendor’s technology. For example, a security VAR would provide implementation services, first level support, customizations and other types of value-adds that make it easier for the customer to use the product.

When the partner sells vendor product, a percentage of that revenue is made available to the partner as coop funds to be used in marketing activities. Here’s an example of the types of activities covered by Cisco. https://www.crn.com/partner-program-guide/pmg2016-details.htm?c=5&wc=4

What’s the difference between coop and MDF?

The basic difference is that coop funds are accrued and MDF funds are made available on a program or project basis. However, many still use the terms interchangeably. CRN magazine uses the following definition in its annual outline of partner marketing programs:

Earned and/or accrued Co-op funds (based on a % of partner sales)

Planned and/or proposal based MDF (based on a specific plan or campaign)

So why is so much of this valuable marketing support funding going unspent? There are three primary reasons that resellers give:

complexity of programs and requirements

Coop and MDF programs have a reputation for Byzantine requirements and approval processes on everything from logo size and placement to tactics. And it’s true most programs govern how funds are spent carefully. But once you get into a routine with your program, it becomes a lot less difficult tips: get to know your program mgr, monitor your accruals, get feedback before submitting, know your expiry dates, work with marketing partners who understand the channel.

Programs are all different as well, and managing eight different coop programs means staying on top of changes. This is a new area we’ll be covering on B2B News Network in our efforts to help make channel partners more successful marketers and we’ll be launching a blog and monthly newsletter called Reseller Engine to track changes in these programs.

Increasing focus on and lack of digital marketing skills

OEMs are increasingly moving away from events and toward digital marketing programs. At the same time, these skills tend to be rare and not mature in most resellers and VARs. Marketing is rarely a strategic function in resellers and is almost always lead generation focused although this is starting to shift as tactics like inbound and content marketing start to take hold in traditionally sales driven environments.

General lack of awareness that the funds exist

In a recent survey, over half of partners were unaware that they had access to coop and MDF funds. These funds when deployed effectively can generate a huge boost for your business, so it’s a mystery why partners aren’t better educated on their existence.

Other factors affecting channel marketing in 2018:

ABM and the channel: what are the implications of the rise of ABM? Is ABM as effective for the channel as it is for the enterprise? Early research indicates that ABM can be an effective approach
All trends at once. The channel is dead. The channel is the future. The channel is consolidating. The channel is fragmenting. Vendors are consolidating … you get the picture. We do know it’s getting harder and harder for vendors to find channel partners, so the leverage might be shifting in the resellerdirection in the near term, good for negotiating agreements!
The role of digital: continues to grow, continues to disintermediate, continues to create new ways of marketing. With digital transformation, the changes are bigger and faster and more continuous than ever before. Still, knowing your audience is the most critical part of developing a strong customer base.
Martech: Even the area of partner management software is an incredibly complex marketplace. There are over 6000 marketing automation vendors in the latest landscape from Scott Brinker. There’s no question martech can make channel partners more efficient and this may lead the channel digital revolution more than anything else.

Looking for more information on coop funds? Are you a reseller wondering how to use yours better? Complete this Reseller Engine needs assessment and we’ll be in touch!