WHYYOUR MDFPROGRAMIS BROKEN (& HOW TO FIX IT)

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CONTENTS

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MDF CHALLENGES

MDF PROGRAMS ARE BROKEN

SO WHAT’S NEXT?

WHY CONTENT MARKETING

HOW TO PRODUCE GREAT CONTENT

ABOUT SPECTRUM GROUP

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”MDF programs were designed in the 1980s to service a one-way relationship between buyers and sellers that no longer exists.

MDF PROGRAMS ARE

Market development funds (MDF) should be the ultimate proof of partnership between technology vendors and the broad range of channel

partners who take their products and services to market. Unfortunately, these programs were designed in the 1980s to service a one-way

relationship between buyers and sellers that no longer exists. It’s a bizarre anomaly for an industry that prides itself on the ability to thrive in a market

de�ned by change.

The world of communications is very di�erent from when the MDF playbook was written three decades ago. Back then, sellers were in control but that’s just not true anymore. IDC estimates 75% of B2B buyers are using

social networks to search for solutions to their business challenges. Forrester Research says these buyers are somewhere between 50% and

90% of the way through a purchasing decision before they ever contact a salesperson.

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”Potential customers want to know what you can do to help solve their business challenges. This is where the technology industry

needs to focus more of its marketing e�orts.

$!

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Power has shifted to these highly informed buyers. Potential customers really want to know what you can do to help them solve their business challenges and achieve their goals. These are the questions they’re jumping online to answer and it’s where the industry needs to focus more of its marketing e�orts.

Most of the marketing material produced by the industry is still focused heavily on the features of products and services, yet nobody outside of your business cares until they’re ready to buy. If that’s when your brand gets involved in the conversation, it’s very likely you or your channel partners will be competing on lowest price. Worse still, there’s a good chance you won’t even be part of the consideration process at all.

The technology industry has a simple choice to make – recognise this shift or continue to waste funds on cold calling, email blasts and other outdated tactics that no longer work.

We spoke with experienced professionals from all tiers of the Australian technology industry in developing this e-book. There were some horror stories of funds being misused by channel partners holding seedy functions in high-class bars, or syphoning o� allocations to promote a di�erent vendor, and channel managers manipulating national campaign funds to reward themselves.

Yet these extreme examples are not the real issue. This e-book explores the ongoing MDF problems faced by vendors and resellers, providing important context based on how B2B purchasing decisions have changed and suggesting an alternative way of allocating these valuable resources. It’s time we said goodbye to slush funds being wasted on corporate golf days and swanky lunches.

Let’s embrace social selling and start driving real business opportunities with targeted marketing content that’s focused on the goals and challenges of your customers.

POWERSHIFT

HORRORSTORIES

”We see less MDF allocated as a percentage of revenue now.It seemed great in principle but in reality it has no impact

on anybody except your best performers. If a partner sells $100,000 of software in a year, this might generate

$2000 to be spent on marketing. What can you do to create any impact with $500 per quarter?

Anybody who’s ever been involved with MDF programs will tell you there’s never enough money to go around. Many of the problems associated with

these programs can be traced back to this fundamental issue. So how does a vendor decide which channel partners receive a share? For many, the simple solution was always to push funds towards their biggest and most successful

partners because they had the greatest market reach.

Steve Martin, director of channels at NEXTDC, says there are major problems with this strategy because most of the marketing dollars get assigned to

those who are already selling successfully, completely ignoring newer partners who are passionate about building a successful relationship. The

focus is also wrong because it forces partners to do marketing when budget is available instead of allocating funds where and when they’re needed.

MDFCHALLENGES

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CHANNEL DYNAMICS' MOHEB MOSES

”MDF programs are often hastily put together to drive sales of a particular product range, they’re not properly resourced or given

enough time to generate results, and everybody moves onto something else once the quarter ends.

Another frequent criticism of MDF programs is the lack of ongoing strategic focus. One of the biggest problems here is the short-term view that comes from aligning with quarterly cycles.

Vendors are understandably focused on hitting sales targets and can’t look any further ahead. As a result, MDF programs are often hastily put together to drive sales of a particular product range, they’re not properly resourced or given enough time to generate results, and everybody moves onto something else once the quarter ends.

Accountability is also an issue. “Sometimes MDF is owned by marketing, other times the sales team is responsible, but either way the rules around how it’s used are usually pretty loose,” LG Electronics general manager of marketing Angus Jones says. “I’ve seen plenty of examples over the years where it just becomes a slush fund for golf days, boozy lunches and other activities that are more readily associated with hospitalitythan marketing.”

In an attempt to make scarce resources stretch further, many vendors will ask channel partners to match any allocation of MDF funding. Advocates argue this creates greater commitment because everybody has ‘skin in the game’ but Moses says it’s unfair because partners typically operate on much leaner pro�t margins.

If a vendor commits $10,000 to fund a campaign or project, the partner’s commitment should be measured in time and resources – building or cleaning up a database, creating content, distributing it and following up on the leads it generates.

Tony Heywood, vice-president of AGC Networks Australia, says allocation matching also encourages partners to get assets created as cheaply as possible instead of focusing on quality. NEXTDC’s Martin says it can also create tension in the business relationship if a partner doesn’t have the cash �ow to unlock the funds they have available, especially when they see that balance fall back to zero at the end of the quarter.

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ALLOCATION MATCHING

LACK OFSTRATEGY

”While vendors like to think of their products and services as ‘solutions’, they’re typically one piece of a puzzle that partners put

together to meet the needs of their clients. NEXTDC’S STEVE MARTIN

Once you get beyond the top tier of large reseller organisations, most channel partners will freely admit they’re not very good at marketing. It’s just not one of their core skills.

“They’re so busy dealing with existing clients and chasing new prospects they’ve already identi�ed that putting together a marketing campaign is a challenge,” Channel Dynamics’ Moses says. “They just don’t do it often enough so it takes a long time and that’s a concern for them when there’s no guaranteed result.”

NEXTDC’s Martin says there’s also disconnect between how vendors and channel partners view the world. While vendors like to think of their products and services as ‘solutions’, they’re typically one piece of a puzzle that partners put together to meet the needs of their clients. “If the partner business is focused on something di�erent to the vendor, those marketing dollars are going to fall by the wayside,” he says.

Creating MDF plans and managing the application process through layers of approval is a huge time sink for any channel manager. AGC’s Heywood says the number one problem with MDF is that approval typically comes through too late.

“I can’t plan activity [without approval] because that would run the risk of wasting my money,” he says. “This is often due to red tape because a vendor has a few channel account managers sending plans through to a channel director, who might have to feed these back up through Asia or even to the worldwide head of marketing.”

He also says partner creativity is often destroyed by the rules vendors place around the use of MDF. “I might have a great idea but it won’t get approved if it doesn’t �t the strict guidelines for this quarter’s campaign. That has to change.”

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RIGIDPROCESSES

OTHERCONCERNS

Most vendors now manage MDF programs by allocating funds on application. NEXTDC’s Martin says this encourages channel partners to be more creative and gives vendors the freedom to place bets on smaller channel partners with great potential.

Importantly, it means partners know funds are available but don’t feel pressured into trying to spend them. Vendors have the opportunity to take a longer-term view, using this model to make sure MDF spending is aligned to their business goals and fostering a closer working relationship with innovative partners.

Some vendors pass control of their MDF programs to their distributors, which AGC’s Heywood says is a smart move. “Distributors tend to deal with resellers on a daily basis whereas a vendor’s channel manager might only talk to them once a month,” he says. Vendors have also tried to overcome the lack of marketing expertise within many resellers by getting their own marketing department involved or paying for a third-party agency. Yet two major problems remain - measuring success and the lack of customer focus.

”A good distributor can structure events, acquire an audience and centrally manage claims. They make it easier to put plans

together, collate them and submit them to the vendor for review.

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SO WHAT’SNEXT?

AGC NETWORKS' TONY HEYWOOD

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Too much technology industry marketing is focused on products and services instead of customer goals and challenges. MDF programs as they exist today were designed for a di�erent point in time when it was quite feasible to put on a breakfast seminar and convince 20 people to turn up.

Those who agreed to trade two hours of their day for a hot plate of food and a co�ee would be subjected to mind-numbing PowerPoint presentations covering every minor detail of your latest product updates. (Get excited, people!) There was a time when this was considered good marketing but it doesn’t work anymore. Nextgen Create managing director Scott Caul�eld says that’s because e�ective marketing is no longer tied to a point in timeso it doesn’t �t quarterly cycles.

“The need for an ‘always on’ digital presence is the most fundamental change and forward- thinking vendors realise MDF programsin their current form are not working,” he says.

“They’re sitting down with channel partners to do an assessment of their website

and �nd out what their digital strategy is. There’s little

or no interest in committing fund to those who don’t meet expectations.”

He encourages vendors and resellers to ditch old-school tactics

like telemarketing, email blasts or lunch and learn sessions. “The biggest

challenge is embracing modern, digital marketing based on getting high-quality content in front of the right people,” he says. “You need to become known for expertise in a certain area and build an engaged community around that.”

MEASURING SUCCESS

CUSTOMERFOCUS

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There's an ongoing sense of disconnect between buying and selling cycles. Sales teams are focused heavily on quarterly sales targets but, even when a piece of marketing has had a positive impact, the buyer’s journey is usually much longer. A great way to tackle this discrepancy is to focus on lead indicators as a measure of success instead of revenue generation.

“If your product is visually appealing it will present well and lends itself to demonstrations,” Channel Dynamics’ Moses says. “When you know a relatively high percentage of people who see it in actionwill eventually buy, you should measure the success of marketing on how many demonstrations it generates.

“If you’re selling enterprise security products, the best proof of value might be identifying holes in a potential customer’s defences. In this case, the best measurement of marketing success would be how many assessments are booked. You want MDF to in�uence behaviour. Revenue will come later as a result of achievingthat goal.”

The biggest challenge is embracing modern, digital

marketing based on getting high-quality content in front of

the right people.NEXTGEN CREATE'S SCOTT CAULFIELD

WHYCONTENT MARKETING?

Customers will manage 85% of their relationships without

talking to a human

85% 70%

70% of people would rather learn about a company through articles

than advertising

40% of B2B buyers frequently share relevant blog posts

40%

The B2B buyer’s journey is longer and more fragmented than it’s ever been. Yet most of the content

on vendor websites is designed to convince potential buyers they should buy their product or service instead of

those o�ered by competitors. This is only relevant when somebody is ready to make a purchase. So what about the rest

of the journey?

Whenever a potential buyer wants to solve a problem, they start by jumping online to gather information. Three out of four

business buyers told ForresterResearch that they conduct more than half of their research online

before making an o�ine purchase. What content are you producing to answer their questions?

Consider these statistics:

3XLEADS

CONTENTMIX

POSITIVEFEELINGS

Content generates three times as many leads as traditional outbound marketing but on average it costs 62% less

61% of B2B buyers say their chosen vendor delivered a better mix of content for each stage of the buyer’s journey

60% of consumers feel more positive about a company after reading custom content

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STATISTICS COURTESY OF AXONN MEDIA, DEMAND GEN, GARTNER AND MCKINSEY.

Australia’s digital industry association AIMIA says nine out of 10 Australian adults now own a smartphone. Six of them have a tablet. Two out of three use a smartphone to browse or search online at least once a day. And more than half are happy to receive o�ers from brands they trust. Earning and retaining trust is the hard part but there are positives here – your customers are always connected, they’re highly active and want to be engaged.

There have been three major updates to the Google search algorithm in the past four years – Panda, Penguin and Hummingbird. These were designed to penalise low-quality sites that are basically online product brochures, negating cheap tricks like keyword stu�ng while pushing content that gets consumed and shared to the top of the rankings. From here on in the rules of the game are simple. Best content wins.

MOBILEIS EVERYTHING

SEARCHGOT SMARTER

THE WORLD HASCHANGED

Advertisers and publishers used to be in control. There was an unwritten agreement that the audience would be exposed to

advertising in return for accessing content. That’s just not true anymore. First we saw time-shifting technologies that allowed viewers to skip

adverts between programs. Now people are using ad blockers to remove advertising from their online experiences. Social media has

given brands an incredible opportunity to talk directly to existing customers and target audience groups, but those who abuse this

privilege to push their own agenda are increasingly ignored. Content must educate, entertain and make your audience feel something.

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HOW

Great content has to be focused on clear business objectives.

Always know what you’re trying to achieve before you start.

ALIGNED WITHGOALS

GREATCONTENT

TO PRODUCE

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Great content is built on long-term strategy but also lives in the

moment. Be aware of opportunities to add context to

current events.

REACTQUICKLY

Great content is part education and part entertainment. It must be

useful and make your audience feel something. Does your content pass

this test?

SHARE KNOWLEDGE

Great content knows who your decision makers and in�uencers

are. What are their goals and challenges? How can your brand

help them?

KNOW YOUR AUDIENCE

BUILD COMMUNITY

Great content sparks conversation. Brands that do this

well actively engage their audiences and encourage them

to help each other.

ABOUTSPECTRUM GROUP

Technology industry experts shared channel marketing insights in the development of this

e-book. All views expressed are personal opinions formed throughout their careers and should not be associated with their current employers. We’d

like to express our warmest thanks to:

INDUSTRY INSIGHTS Scott Caul�eldNEXTGEN CREATE

Tony HeywoodAGC NETWORKS

Angus JonesLG ELECTRONICS

Steve MartinNEXTDC

Moheb MosesCHANNEL DYNAMICS

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Contact us today and let’s talk about how we can help you make better

use of MDF funds to drive real business opportunities

for your brand and channel partner community.

02 9469 5700content@spectrumgroup.is

ABOUT THE AUTHORBrian Corrigan is the Content Director at Spectrum Group. He previously spent six years writing about the IT channel as a reporter then editor of Australian Reseller News. He also spent four years covering the technology industry as a senior reporter and online editor with The Australian Financial Review. These days he’s focused on helping clients tell their own stories more e�ectively.

At Spectrum Group we tell the stories that won’t tell themselves. We help brands cut through the noise with a full range of integrated communications strategies, including content, social media, PR and design. We deliver measurable business results, using a combination of creative ideation, messaging and positioning, public relations, social strategy, content marketing, thought leadership and events. Spectrum Group bridges the gap between what companies want to say about themselves and what audiences are actively looking for. From innovative start-ups looking to disrupt the market and accelerate publicity, to large enterprises wanting to reinvent, launch new products or enter new markets, we listen and develop a strategy that breeds success. Spectrum Group connects brands with audiences in Australia and globally.