5 Ways to Capture More MDFBy Kathleen A. Martin | Posted 2008-11-16 Email Print
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There's no federal bailout for the channel. But solution providers can earn greater shares of vendors' marketing development funds. Here's a few tips on how.
With the swipe of a pen last week, American Express suddenly transformed itself from a credit card holding company to a bank, making itself eligible for about $25 billion of that federal bailout fund.
I am sure all of us thought about how to become a financial institution to claim our share of Washington’s $700 billion bailout pool. Transmuting your solution provider business into a bank isn’t practical, but there are ways of getting your hands on cash without meeting the federal financial regulations.
Marketing development funds (MDF) and co-op funding has long been a double-edged sword for many solution providers. Many vendors’ offer one or both of these incentive payments to augment and develop their partner’s business. Unfortunately, many—if not most—vendors make solution providres jump through hoops to receive the premium amounts handed out to the top tier of program participants (try saying that three times fast).
Here are a few tips to increase your share of vendor MDF pools:
1. Review and Assess MDF Programs. Not every program is right for every solution provider. Understanding how much a program will pay out before you invest can save you time and money. If the payout is 5 percent but the resources needed to meet the claiming requirements eat up 10 percent of your business resource, you’re upside down with the program. The terms and conditions of most MDF programs can be found on vendors Web site or partner portals. If you don’t have time to read all the fine print, ask your distributor. Distributors are well versed in a variety of programs and can assist you in finding the right program for your business.
2. Complete Certifications. Understand the certification requirements for the products you choose to offer. The incentives for business partners who complete training are substantially more than those who do not. Look for programs that are offered online or where time out of the office is kept to a minimum. Consider salary increases for your sales team members who complete certifications. Do the ROI calculation, first, since you don’t want to invest a lot of time if you’re only going to get a minimal return on MDF allocations.
3. Utilize Special Bid and Meet Comp Programs. When it comes down to winning the business any manufacturer will assist you with the best price on their product. Be sure to understand the special bid process for the products you offer and be ready to submit requests before you are in a bidding war with a competitor.
4. Stack Your Program Offerings. Special bids can often be combined with rebate programs; upfront discounts cannot. Talk with your manufacturer representative or distributor to understand where you can increase your payouts by taking advantage of unadvertised floor days, special incentives or stacked program offerings.
5. Do the Math. There is often a difference between manufacturer’s suggested retail price (MSRP) and what you pay for a product. Do not automatically assume that you will always sell your product at MSRP and pocket the difference plus program payments. Understand the math for your business offerings and price your products accordingly. Choosing to take inventory on products that you can purchase at a reduced price can increase your profits if you are in a position to do so. Conversely, drop shipping from a distributor to your customer can also allow you to increase your profits by limiting the space you need for inventory and saving on shipping.
There’s no free bailout money for small IT businesses. There are partner incentives available through manufacturer programs that can increase your profits and revenue if applied properly.