The allocation of market development funds (MDF) to channel partners is a common component of most vendors’ indirect sales programs. But at many companies, MDF initiatives are built upon opaque processes and generate uncertain results.
Many channel managers struggle to report on the ROI their MDF programs generate. Learning opportunities to support continuous improvement are missed. And because partners pass on the opportunity to use much of their MDF funds, their value to generate demand and revenue goes untapped.
CMOs aren’t blind to the benefits that more streamlined processes and improved visibility into channel management would provide. In a survey by Model N, a provider of cloud revenue management solutions, a quarter of the CMO respondents said improved channel management would have the greatest impact on their company’s overall business results. Improved speed and accuracy of doing business with channel partners would be beneficial, said 42% of the CMOs.
Their colleagues in the C-suite agreed that limited real-time visibility into indirect or channel sales program data hampers their ability to address issues in a timely manner. According to the Model N survey, 75% of the respondents believe they “leave money on the table” and could more effectively drive revenue.
As companies continue to funnel billions of dollars into their MDF programs, channel leaders are seeking solutions to help them optimize the value of their budgets. “The ‘holy grail’ in MDF is the ability for solutions to enable partners to associate registered leads and deal numbers with a funded campaign,” said Dave Hafermann, Principal of Go-To-Market/CRM solutions at Vistex, a supplier of go-to-market software. “And then be able to close the loop, not only through booked sales, but invoicing too.”
Channel leaders are clearly under more pressure to determine the ROI of their MDF programs, added Lisa Salvino, Sr. Manager of Global Client Services at Vistex.
“They're getting pushed from above to know where the money is best spent, and whether it’s helping move the needle at all.”
Enabling Nimble Response
Reporting ROI is just one of the challenges that channel leaders are addressing with increased access to channel data. At Red Hat, a provider of enterprise open source solutions, easy access to channel data integrated with other sales data is critical to enabling nimble reaction to market events.
“Revisiting our budget and goals is a continually evolving process based on what today's needs are,” said Julie Hegner, Red Hat’s Director of MDF. “With the tools today that didn't exist 10, even five years ago, we can pull in more data from different systems. We can put them into a dashboard, into a review by partner, by region, by country, whatever it is that we want to look at, in order to help make decisions on how to make the investments in those areas.”
Improved access to partner data helps Hegner and her team better target the partners who might optimize MDF support. “If we have the right partners and we know their abilities, and we know their customers and who they're already working with, then we can work with them towards solutions and funding the activities that are going to drive pipeline in order to create revenue for both of us.”
Hegner relies on channel data collected in her partner relationship management system to better inform MDF planning. “Has that partner been growing year over year, quarter over quarter? In what areas?” she said. “We use this data to review what that investment could or should look like, in addition to how willing the partner is to engage in activities. When it comes to MDF investments, we looked at all of those pieces. For example, some partners might be overly eager when they're not enabled in certain areas. That's when we take that as a cue to work on their enablement skills and then work on furthering investments.”
Magnifying Opportunity Visibility
Channel data management historically meant gathering data from channel partners to monitor sales activity and inventory levels. But an expansion in channel data management practices is supporting a broader view of interrelated enterprise information to inform channel marketing decisions as well, according to Mike Moore, VP channel, e2open, a business systems solutions provider.
“The data gives marketers insight into inventory status, what’s selling and what could be sold,” Moore explained. “With SaaS, for instance, performance data around consumption of the software represents even more insights and more opportunity. If a SaaS software product is based on a certain consumption model — like bandwidth activity, database size, throughput — CDM gives marketers more information to think about planning programs and incentives, aligning benefits, including market development funds.
“That's what a lot of the channel teams are looking for in channel data today — to try to predict what could happen next: what are the next logical purchases?” he continued. “What's the most logical product to attach to an existing purchase? How do we position a campaign through the channel around that opportunity?”
Companies are also using channel data management tools to break down barriers within their organizations. “Marketing metrics and the channel have traditionally been in a silo,” said Moore. “And more and more, we're seeing our customers bring those metrics into their channel data management platform and combine it with sales data so they can start to see the correlation between marketing activities and how that translates into sales results.”
Closing The Loop On ROI
With comprehensive channel data management capabilities, channel marketers can more reliably report on the value being generated by MDF allocations. “Channel data management is the way you close the loop to truly measure ROI for MDF,” said Chanan Greenberg, SVP & General Manager of High Tech for Model N.
Many companies use demand signals, such as deal registrations, to measure the success of their MDF programs. But sales data or information that might reflect how the marketing activity impacted inventory levels may not result for another 90 days, according to Greenberg. “Knowing if you are truly converting registered deals into actual revenue — which is what companies really care about — is where you need channel data management to close the loop,” he said.
Deeper utilization of channel data can enable marketers to ensure that MDF is being allocated more purposefully, according to Claudio Ayub, Chief Strategist at Perks Worldwide Channel, a provider of channel incentive solutions. “There is a whole range of metrics associated with every MDF-funded activity that you can measure and use as leading indicators,” he said. “For example, marketers might notice that a significant part of their MDF budget is not being used as planned and must be re-allocated.”
Of course, the key to measuring the success of an MDF program is carefully identifying appropriate metrics. “It’s difficult to be able to improve MDF performance if you have an ongoing program that didn’t start with the specific KPIs that you wanted to track, measure and report on,” said Ayub.
“Those key performance indicators are going to allow you to do the planning,” Ayub continued. “They are going to allow you to incent those activities and behaviors that actually compress time to revenue in that partner's sales process.”
Ayub described a “three-bucket” process for utilizing channel data to optimize an MDF program:
- What are you going to track? “You have to identify those KPIs to measure across each phase of the sales process for prescriptive activities funded by MDF,” he said.
- Define why the data is being tracked. “That's going to help you set benchmarks attained by successful partners and measure against those by other partners.”
- Define how you will track the data. This is defined by your MDF and CDM-supporting technologies.
Most importantly, Ayub emphasized that channel marketers shouldn’t over-complicate their strategies. “Try to make them simple,” he concluded.