MDF or Market Development Funds are monetary funds given by manufacturers, brand owners, sales or marketing departments to help a partner/reseller/distributor to market the manufacturer’s brand. MDF funds are disbursed based on the execution of a marketing plan agreed-to, between the partner and the manufacturer. These funds are not sales incentives or promotions. They are mainly used for the co-marketing and co-branding of products. Providing market development funds is in the best interest of the manufacturer to increase the outcome.
The end-to-end business processes of the MDF solution enables companies to better manage and allocate funds to their channel partners; provide partner self-service for requesting and claiming funds; ensure legal compliance of funding practices; and most importantly, helps the Brand Owner understand the effectiveness of their channel marketing expenditures.
MDF is part of the Partner Channel Management scenario in the SAP CRM solution. The Brand Owner/Manufacturer is often referred to as Channel Manager and the reseller/distributors as Channel Partners or Partner. In this blog, I refer to them as Brand Owner and Partners respectively.
MDF consists of long and short term planned projects where the product manufacturer/brand owner decides to market a particular product; defines the kinds of marketing activities to be done; how much and how the funding is to be used for these marketing activities. In setting up projects, you can decide on the participating partners, define what expenses can be claimed, duration, and kind of activities that can be conducted, as well as define reimbursement rates at which the expenses can be claimed.
SAP CRM MDF supports –
Brand owner to:
- Allocate funds to their partners to execute marketing activities.
- Centrally plan, manage and align marketing activities (such as when, where and what) conducted by partners.
- Track expenses incurred by the partners in the execution of marketing activities.
- Use the solution to allocate funds within their network and manage their activities.
- Create claims for reimbursement, track approval and payout status.
The above processes are supported by the following functionalities:
- MDF Program setup
- MDF execution with Partners
- Funds Management
- Claims Management
- Financial accrual management
- And is fully integrated with SAP ERP – payout and controlling.
Furthermore, MDF is also about co-marketing activities done along with your partners, who use the (Brand Owner’s) product as an internal element in their own product -forming a channel of sales, which is further utilized for marketing and co-branding. E.g.: Processor supplied to Laptop manufacturers, graphics cards supplied to gaming device manufacturers.
With MDF, partners are motivated to market products due to additional funding from the brand owner. Brand owners are enabled to proactively market when they want to showcase and promote their brand to increase market presence – leveraging on Partner presence and marketing activities in various regions to increase the marketing reach and ensure consistent branding of the product.
Predominately used by the high tech industry, MDF supports all of the Brand Owner’s collaborative marketing activities along with their Partners in other industries.
Benefits of MDF to Brand Owners and Partners:
- Can closely monitor the expenses incurred by partners during the execution of marketing activities.
- Have visibility and can control unwanted and fraudulent claiming
- Regulate funding usage by assigning an expiration period to the funding.
- Model themselves and their channel in the system, as well as, organize and manage them.
- Plan activities, regulate and spread it over time or reserve money for future activities.
- Directly create claims for the money spent.
MDF Claims are integrated to ERP payout processing and CO-PA – allowing accrual management and triggering accrual posting into ERP.
For detailed information, please see the RKT Material on the SAP Service Marketplace under http://service.sap.com/rkt-crm -> CRM 7.0 (or CRM 2007) -> Partner Channel Management.