Most companies sell directly to the customers or leverage their channel partners to sell to their end customers. Manufacturers/Brand Owners like to enhance their sales reach or get new customers by capitalizing on the physical presence of their channel partners. They would also like the channel partners to perform marketing activities in their region to promote their brand resulting in additional sales revenue. Market development funds (MDF) or Co-op Funds are used by Brand Owners to provide funds to channel partners, resellers, VARs, or distributors, to enable increased sales of their products and create local awareness about their brands.
Generally two types of Channel Marketing marketing programs are used by manufacturers with some variations. In Marketing Development Fund (MDF), the manufacturer does joint marketing activities with the channel partner and reimburses a portion or the full cost of the marketing activity to the partner. In Co-Op program, the manufacturer reimburses the partner a % of marketing funds based on Sales volume for the agreed upon marketing activities.
There are plenty of the reasons why these programs do not work as per their defined objectives. Some of the challenges faced by manufacturers and partners are:
• How to attract and ensure that channel partners participate in the Channel Marketing program?
• Is the process clearly defined for the manufacturer and channel partner and is it easy to use?
• How will a joint marketing plan be developed and who needs to be involved in the approval of that plan?
• What is the accounting system of managing the Channel marketing program?
• How to measure ROI of the Marketing program? Are the Manufacturer and channel partners benefiting from the program?
• What tactics will be used for the program? Would these tactics work for the channel Partner in their region?
• How do channel partners create claims and access claim/performance information
• What is the visibility of the entire channel marketing process within different departments of the manufacturer and channel partner?
• How quickly and smoothly partner claims can be processed?
• Poor communication about the program to channel partners and within the manufacturer departments
In a competitive and ever changing landscape, the manufacturer and partner both have a vested interest in the success of the program and hence need to devise channel marketing programs that benefit both. It is recommended that the following key metrics/KPI’s be measured and monitored consistently for the effectiveness of channel marketing programs.
• Fund Utilization
• Program liability
• Number of partners enrolled in the program
• Number of partners using the program
• Program ROI
• Incremental Sales revenue
• Increase in number of Leads
• Number of claims, Claims approved, Claims denied