There’s no turning back when it comes to entering and navigating the global partner ecosystem. Based on its 2021 study, Accenture made it clear that “to win partner mindshare and for future growth, companies must co-innovate, co-invest, and collaborate across the ecosystem.” Channel partners, they determined, must be prepared to financially commit across company boundaries to programs for collective success.
Companies, both large and small and across multiple sectors, are increasingly turning to partner incentive funds to optimize strategic relationships with distributors, channel partners, and even complementary competitors. Through this co-investment, their product or service offering is mutually enhanced to improve the customer experience and drive sales.
A multibillion-dollar industry
Partner funds are part of a growing $300B+ industry, making it a huge opportunity for ecosystem entrants. There are many kinds of partner incentives but one of the most common is market development funds (MDF), which are designed to provide financial support for joint marketing, sales, proof of concept, and other market development initiatives.
But do MDF partner programs really work? A recent 2112 Channel Chief Outlook Report says yes. In it, 51% of channel professionals considered MDF to be the most effective way to influence partner behavior and performance.
Use and structure
MDF partner programs allocate funds to support advertising, promotional events, campaigns, product and services training, and other initiatives that drive brand visibility and sales. The outcomes, impact, and benefits are mutual: vendors score resources to build their brand exposure and potential for new customer streams, and the benefactor grows a new set of arms and legs to extend its marketing budget.
There are several principles that contribute to designing a successful MDF partner program, and all must be thoroughly considered before a single dollar changes hands:
Purpose: What are you hoping to accomplish? Expand your market reach, grow indirect revenue, or something else entirely? Internal clarity and alignment are critical before you begin assigning funds to your partners.
Budget: It’s not uncommon to implement multiple MDF programs concurrently, and how you divide and designate your finite pool of resources depends on your business priorities. Another consideration is the capacities to which your partners can apply the funds for mutual success.
Target Market: Here’s where identifying your audience calls your intended partner into play. In addition to narrowing your market decisions based on your program goals, you need to consider your partner’s objectives, their expertise with the audience, and the competition.
Region: Your partners’ expertise in given locations should also guide your decision-making. Industry trends, geo-based demand, regional investment costs, and close alignment with partner objectives and expertise are essential considerations.
Timelines & Schedule: A systematic plan and sequence of events are part of your recipe for success. Documenting every milestone with a definitive date or time frame will empower and ensure later phases of the MDF program process.
Process & Guidelines: Expectations are cemented with a careful blueprint and strategy. Getting and keeping your partners on the same path and direction in which you’re headed will ensure that guidelines for MDF utilization are understood and adhered to for optimal ROI.
Outcome & Impact: Laser-focus on your target and aiming before your shoot are sure-fire ways to achieve hoped-for dividends. Make and keep program metrics crystal-clear for your partners so they understand the system, tracking methods, and criteria you’re using to gauge success.
Putting it all together
Once you have these parameters in place, you can set to firmly establishing four key pillars of your MDF program:
- Strategy: Just as you may have concurrent MDF programs, each may vary based on your business partner. For example, many companies have replaced traditional partner reselling with co-building and co-selling solutions.
- Policy: Putting guidelines in place for your partners delineates your expectations and standards for execution. It should be made clear that compliance with your policies is a precondition for becoming and remaining a participant in your MDF program.
- Management Platform: As MDF programs have grown, so has the availability of automated tools to manage them. The right platform keeps partners connected in a single interface to provide status, real-time metrics, ROI insights, and funds and claims status.
- Implementation: Now you’re almost ready to roll. The process for implementing your program comprises six key steps:
- MDF applications from partner candidates
- Review, approval, or rejection of applicants
- Funding launch
- Outcomes measurement
- Reimbursement claims acceptance
- Funds and claims payout
Success in action
Red Hat, a Raleigh, NC-based provider of open-source software solutions, supports joint go-to-market initiatives with many of its partners using MDF programs. Approximately 75% of Red Hat revenue is said to be influenced by its partners. By scaling and automating its MDF program, Red Hat realized 67x ROI with standardized proposals, streamlined claims and funds workflows, and digitized reporting.
Partner ecosystems are driving new market opportunities for companies like never before, meaning partner incentive models need to adapt to keep up with and stay ahead in the marketplace. Do your research and put your strategic and creative thinking to work to access new markets and enhance your product offering for a broader customer base.
