The madmen of MDF

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This article appeared in the November 2014 issue of CRN magazine.

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The madmen of MDF
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For blue chip, multi-national companies, the marketing game is all about being brave. It’s about spending, trying new tricks and mastering the new worlds of social media, experiential opportunities and digital wizardry.

In the Australian IT channel, a change is also sweeping through the way companies approach marketing. While the campaigns involved might not be the kind of design-led creative standouts that win at the Cannes Lion advertising festival, brave resellers could see substantially improved business prospects by taking a smarter strategy around marketing.

Marketing is not a new word in the vocabulary of the IT channel. Marketing development funds (MDF) are loved and loathed in equal measure. This funding that trickles down from vendors, sometimes via distributors, and into the hands of the channel can help create market demand for technology. However, the often onerous process of securing funds can make a reseller ask whether it is worth the effort.

An emerging trend may improve and potentially streamline the MDF process for resellers, while also adding a bit of hot sauce to the channel marketing mix. Distributors have been partnering more closely with marketing agencies.

The first moves were made by Nextgen Distribution and DNA Connect; they forged alliances with Bang Australia and PushPull Marketing, respectively. These partnerships illustrated two major changes for the Australian IT industry.

Firstly, the industry is starting to get very serious about marketing, and in a roundabout way, the use of MDF. Secondly, it signals a new business opportunity for distributors, one that was brought about due to a substantially changing environment. 

“Information is so easily available today,” says Scott Caulfield, managing director of Nextgen Create, the new name for the joint venture between the distie and agency Bang Australia. “Years ago, salespeople were often engaged as they were distributors of information for customers and created prospects for sales.

"Now [buyers] don’t need to speak to sales, sometimes [they] don’t want to. That is a fundamental shift that impacts sales and sales numbers. Partners realise that sales and marketing alignment is more important now. The role of marketing is not an event, it’s a science.”

Paul Sadler, who became marketing director of DNA Connect through its acquisition of PushPull, says the channel’s approach to marketing hasn’t changed much over time. This is a problem. The rapid changing in buying behaviour has necessitated a reassessment of the industry’s marketing needs – and the change needs to happen quickly.

“Partners still want leads and vendors are still wanting to fund partner-led demand generation, but only a small number of partners are utilising the funding or support available from vendors,” he says. “There is a big gap between partners generating leads and those who should be but aren’t. This presents an opportunity for distributors and vendors and they need to step in.” 

It’s all about spreading the marketing resources of the industry around to more resellers and addressing the divide between tier one resellers and the rest. MDF can be water in a drought for some, but it can also create more problems than it solves. 

The catch-22 is that larger resellers find it easier to lock down MDF but it’s the smaller companies that can get the most benefit. Because internal marketing resources are scarce among smaller resellers, they should benefit the most from a bit of support via MDF; however, this lack of resources can make it harder to secure the funding. And even when these smaller companies are successful in attracting MDF, too often their marketing plans don’t show the necessary return on investment to convince vendors the spend was worthwhile. 

Other times, the reseller doesn’t have the appropriate information to choose the best marketing campaign. “There are so many different marketing tactics that could be executed and it’s becoming more complex as more end customers become tech and marketing savvy,” explains Sadler. 

“Over the years there has been a gradual decline in channel marketing spend and a gradual increase in end customer MDF available for partners to use. The gap is that the tier one partners present a plan on how they will use MDF and the tier two don’t. I don’t think that vendors are giving funding to tier one [companies] just because they are tier one: there just aren’t a lot of requests for funding coming from tier two,” Sadler adds.

Next: focused marketing

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