What market development funds are
Market development funds, usually shortened to MDF, are money a vendor gives its channel partners to spend on marketing that sells the vendor's product. The partner knows its market and has the relationships. The vendor has the budget. MDF puts the two together.
A typical MDF activity is a webinar a consulting partner runs for its clients, a paid campaign an agency runs to its industry, or a booth a reseller takes at a trade show. The partner plans and runs it. The vendor approves it in advance, then reimburses some or all of the cost once the partner shows it happened and what it produced.
MDF is common in large hardware and software channel programs. Smaller SaaS companies can run a lighter version that keeps the useful part, funding partners who will actively market you, without the administration.
MDF vs co-op funds
The two terms are often used interchangeably. When they are separated, the difference is how the money is allocated.
| MDF | Co-op funds | |
|---|---|---|
| How a partner gets it | The vendor decides which proposals to fund | The partner earns it as a share of their sales |
| Typical size | A budget per partner or tier, or per activity | A percentage of the partner's revenue, accrued over time |
| Approval | Each activity is approved in advance | Activity must fit the rules, approval is lighter |
| Best for | Targeting money at strategic partners and campaigns | Rewarding partners in proportion to what they sell |
Pick one model, name it clearly in your partner program guide and stick to its rules.
How MDF works: the workflow
Every MDF program runs some version of the same five steps.
| Step | Who | What happens | Sensible default |
|---|---|---|---|
| 1. Request | Partner | Submits a short proposal: the activity, audience, date, total cost, amount requested and expected leads | At least 30 days before the activity |
| 2. Approve | Vendor | Checks eligibility, budget and fit, approves an amount and states the proof required | Decision within 5 business days |
| 3. Run | Partner | Runs the activity using approved messaging and branding | Within the approved dates |
| 4. Claim | Partner | Submits invoices, proof of performance and the leads generated | Within 30 to 60 days of the activity |
| 5. Reimburse | Vendor | Checks the claim against the approval and pays the approved costs | Within 30 days of a complete claim |
The approval in step 2 is the step to get right. It is where you agree the amount, the reimbursement percentage and what proof the partner must provide. A clear approval makes the claim easy to check. A vague one turns every claim into a negotiation.
MDF eligibility rules
Write these into a one-page MDF policy that partners accept before they request funds.
- Who can request. Usually partners at your middle or top tier, with a signed partner agreement. See our partner program tiers guide for how to set tiers.
- Pre-approval. No reimbursement for activities that were not approved in writing before they ran.
- Partner contribution. The partner pays part of the cost, commonly 50%. Partners who spend their own money pick better activities.
- Your product must be featured. The activity markets your product by name, with messaging you have approved.
- Lead sharing. The partner submits the leads the activity generates, so you can measure results and protect the partner's deals.
- Claim deadline. Claims submitted after the deadline are not paid. Funds not used by year end do not roll over.
- Excluded costs. Partner salaries, general brand advertising, travel, gifts and discounts given to customers.
Examples of eligible MDF activities
| Activity | Typical proof of performance |
|---|---|
| Webinar or virtual workshop featuring your product | Registration and attendee lists, the recording, the invitation email |
| In-person event, such as a client breakfast or roundtable | Venue invoice, attendee list, photos |
| Trade show booth or sponsorship | Sponsorship invoice, booth photos, lead scans |
| Paid search or social campaign promoting a joint offer | Ad screenshots, platform invoices, clicks and leads report |
| Email campaign to the partner's client list | Copy of the email, send and click report |
| Co-branded content, such as a guide or case study | The finished asset, the invoice for design or writing |
| Direct mail to target accounts | Printer and postage invoices, the mailing list size |
Activities that produce named leads are easier to measure than awareness campaigns. Favor them, especially in your first year.
A lightweight MDF program for a small SaaS company
You do not need an MDF portal, a claims team or a percentage-of-revenue accrual to start. A small SaaS company can run a version that fits on a page:
- A fixed annual pool. For example, $20,000 for the year, released quarterly at $5,000.
- Top-tier partners only. Fund the partners already producing, not the ones you hope will.
- A cap per activity. For example, up to $3,000 per activity, and up to $6,000 per partner per year.
- A 50% match. You reimburse half the approved cost.
- A one-page request. Activity, audience, date, cost, amount requested and expected leads. Ask partners to tie it to their joint business plan where they have one.
- One approver. The head of partnerships approves, so decisions are fast.
- Leads through your normal referral process. Every lead from the activity is submitted the same way as any other referral, tagged with the campaign.
Review the pool each quarter. If one partner's activities keep producing pipeline, give them more. If another's produce nothing, stop funding them.
A worked example
Brightline Agency, a Gold partner, proposes a three-part webinar series for marketing leaders in retail, featuring your product.
- Total cost: $6,000 for paid promotion, design and a guest speaker.
- Requested: $3,000, which is 50% of the cost and within the per-activity cap.
- Expected: 150 registrations and 30 qualified leads.
You approve $3,000, with proof required: the invoices, the attendee list and the leads submitted through the portal within 30 days.
The series runs in March. Brightline submits its claim in April: $6,200 in actual costs, 140 registrations and 34 leads. You reimburse $3,000, the approved amount, not 50% of the higher actual cost.
By the end of September, the results look like this:
- 34 leads submitted, 10 became qualified opportunities.
- Pipeline from those opportunities: 10 at an average of $15,000 = $150,000.
- 4 deals won, including Hawk Digital and Kestrel Foods, for $60,000 of first-year revenue.
How to measure MDF return
Measure every activity on the same few numbers, starting from the leads it produced:
- Cost per lead. MDF paid divided by leads. Here, $3,000 divided by 34 = about $88.
- Pipeline per MDF dollar. Pipeline created divided by MDF paid. Here, $150,000 divided by $3,000 = 50 to 1.
- Revenue per MDF dollar. Won first-year revenue divided by MDF paid. Here, $60,000 divided by $3,000 = 20 to 1.
- MDF cost per won customer. Here, $3,000 divided by 4 = $750.
Two cautions keep the numbers honest. First, give activities enough time: in a sales-led business, revenue from a March event may not close until the fall, so report pipeline at 90 days and revenue at six to twelve months. Second, count only deals that came from the activity's tagged leads. If a deal was already in your CRM, it does not count toward the activity.
Add MDF to your total cost per partner-sourced customer alongside commissions, so you compare partner marketing with your other channels on equal terms. Our partner program KPIs guide shows how.
Common mistakes
- Reimbursing without pre-approval. It rewards spending, not planning.
- Funding activities with no lead capture. If you cannot see the leads, you cannot judge the activity.
- Letting funds roll over indefinitely. Partners treat unspent balances as owed money.
- Slow reimbursement. Partners who wait three months to be paid stop asking for funds.
Running MDF without spreadsheets
A small MDF program needs three things: a request form, a record of what was approved, and a way to tie leads back to the activity. Partner.io automation flows send emails and create tasks for your team from partner events, and leads from the activity arrive through the partner's portal referral form like any other referral, so you can tie pipeline back to the campaign that produced it.