Loyalty Register glossary
Market development funds
Money a supplier gives channel partners to fund marketing and sales activities that build demand for its products, usually approved against a plan.
Market development funds, usually called MDF, are money a supplier makes available to its resellers, distributors and other channel partners to pay for marketing and sales activities that build demand for the supplier’s products. Typical uses include campaigns, events, trade shows, lead generation, content and sales training. Partners usually apply with a plan, the supplier approves it, and the partner is reimbursed after showing that the activity ran.
Updated · By Loyalty Register Editorial TeamRelated reading
How is MDF different from co-op advertising?
Co-op funds normally accrue automatically as a share of what a partner buys, and the partner draws on its balance for approved advertising. MDF is usually discretionary: the supplier decides which partners and which activities to fund, often based on growth potential or a strategic goal such as entering a new market or launching a product. Many suppliers run both, using co-op as a baseline and MDF for targeted growth. In practice, some programs blur the line by setting MDF as a percentage of purchases, which makes it behave like co-op.
How does an MDF claim work?
A typical cycle has four steps:
- The partner submits a plan with the activity, budget, timing and expected results.
- The supplier approves it, sometimes for a share of the cost rather than all of it.
- The partner runs the activity.
- The partner claims reimbursement with proof of performance, such as invoices, copies of ads, attendance lists or leads generated.
Payment can be in cash or as a credit against future invoices. Unused funds usually return to the supplier after a deadline.
What goes wrong with MDF?
When funds are allocated mainly by past purchase volume, the largest partners receive the most, whether or not their activities create new demand. Partners may also use MDF for marketing they would have run anyway, which turns it into a discount. On the other side, slow approvals and heavy paperwork discourage smaller partners, so funds go unused. Rules on fair treatment of competing partners also need care, because promotional funding offered to some resellers and not others can raise legal questions.
How should you judge the return?
Compare the sales of funded partners, or funded regions, with similar ones that were not funded, over a period long enough for the activity to show results. Track the share of funds claimed, approval time and the leads or sales tied to each activity type. Move money toward activities that show results, and cut those that do not.