There’s always a better way.
A better way to handle conflict.
A better way to manage your time.
A better way to use your market development funds.
Market development funds (MDF) are often overlooked. They tend to be used at the end of the year for branding on items like golf balls, t-shirts, and hats.
However, when procrastination is not in the picture, MDF can be used as a valuable tool to deliver sales for your company and your business partner(s).
In this article, you’ll learn what market development funds are, the benefits of managing them properly, and best practices for their use. We’ll use Mueller’s collaboration with 3M as an example.
What Are Market Development Funds?
Market development funds stem from a relationship with a business partner. The money is based on a percentage of sales from the previous year.
For example, let’s say in 2020, 3M sells $1 million worth of product to Mueller and the MDF rate is 5%. That means in 2021, Mueller will have access to $50,000 for advertising their partnership with 3M, as well as other sales and marketing efforts.
If you don’t properly manage MDF, the money could be forgotten until you reach a point where you have to hastily use it or lose it. A better strategy would be to take a look at your MDF at the beginning of the year and make a plan with your business partner to use the money in the best ways possible as the year progresses.
Working as a team to run joint marketing or promotional campaigns will maximize the value of MDF and make sure the money doesn’t go to waste on either side.
What Are the Benefits of Managing Market Development Funds?
You Can Target the Funds Based on Strategy
If you wait until the last minute to decide how to use your market development funds, you’ll focus more on marking the task off your to-do list than choosing the best implementation of those dollars. When you get a head start on properly managing MDF early on in the year, you’ll have time to think outside the box and match the money to your goals.
You should decide what to do with market development funds based on what and who is important to your marketing strategy. This allows you to create a competitive advantage and generate a quantifiable return. When you start to look at MDF as a year-long investment instead of an end-of-the-year rebate, you’ll find new ways to grow sales and strengthen your partnership.
You Can Leverage Your Partner’s Knowledge and Power
When you work with your business partner to decide how to distribute market development funds, you can’t help but learn from each other. You will get intel from your cohort that you can’t get anywhere else and vice versa. Managing MDF with your business partner allows you to not only establish a long-lasting relationship, but also open the door for other marketing opportunities.
For instance, Mueller was recently approved to be an automotive converter, a distinction that allows us to be an aggressive competitor in that industry. This designation would not have happened without our partnership with 3M.
“The automotive group saw the fruit that was generated from the relationship that we had in the industrial group and how we worked together through the marketing funds. That’s what appealed to them,” said Michael Bryant, sales manager.
You Can Identify Partners Who Want to Grow with You
Expressing the desire to manage market development funds with your business partners is a way to pinpoint who wants to join you in an alliance for growth.
As a result of our collaboration, Mueller’s relationship with 3M has grown every year. Sitting down together and laying out plans for market development funds allows us to play off each other’s strengths and utilize shared knowledge in the industries we serve.
Moving forward, the folks at 3M know they will get the first peek at opportunities with Mueller and the last glance before final decisions are made. This formation of a true partnership assures them we have a vested interest in their company.
“It is an extension of their sales efforts to make sure we’re well-equipped and well-motivated to partner with them and sell their product,” Bryant said.
What Are the Best Practices for Managing Market Development Funds?
Establish Point of Contact
You need to start by developing a point of contact with your business partner who’s focused on helping manage your market development funds.
For Mueller, that person is David Schoepske, an account executive with 3M. He acts as a liaison between the two businesses and knows the ins and outs of his company.
“Having him steer us in the right direction within 3M is huge,” said Bryant.
It’s important to stay in touch with your point of contact on a regular basis. It’s not enough to meet once at the beginning of the year, come up with a plan, and then it’s every man for himself. Schoepske visits a few times a month to talk about joint marketing efforts between Mueller and 3M.
Present Ideas and Make Decisions
Pick out which initiatives you think are best to allocate your market development funds to and then come up with a plan to put in front of your business partner.
Mueller creates a spreadsheet of ideas that we present to 3M’s account executive where we list the potential efforts of promoting both companies. Then, together, we figure out what works and what doesn’t.
It comes down to both partners making a conscious effort to make the best use of those marketing dollars in a way that’s beneficial to both entities. Neither party wants the money to be squandered, so why not work together to generate the best strategy possible?
Implement the Plan and Follow Up
Once you’ve created your market development funds plan, execute it and keep track of the results.
Mueller and 3M decided to use MDF in three areas:
- Ads: Creating Google, LinkedIn, and Facebook ads with Mueller and 3M
- SEO: Paying a digital marketing company to track what people are searching for in relation to 3M and making sure Mueller’s website answers the questions
- Training: Getting Mueller employees up to date with the latest on 3M products
As you’re analyzing the outcomes of your efforts, don’t forget to follow up with your business partner to identify any new marketing opportunities or make adjustments as needed.
As a result of implementing a market development funds plan, sales from Mueller to 3M have seen double-digit growth year after year.
How Can I Manage Market Development Funds to Grow Sales and Build Partnerships?
Don’t look a gift horse in the mouth. Get the most use out of your market development funds by getting creative (early) and cooking up a plan with your business partner that benefits you both.
You’ll be able to target these funds based on your marketing strategy, use your business partner’s knowledge to compete in the market, and spot who’s in your corner when it comes to cooperative growth.
Mueller and 3M get results with good communication, cohesive planning, and joint execution. We’ve found a better way—together.