Market development funds: Innovated

Companies teaming up for mutually funded and mutually beneficial marketing campaigns isn’t a new trend—it’s the whole idea behind the “solution sell.” Market development funds (MDF) are the conduit by which these programs are implemented. Each partner gives a little, in terms of money, time, and “real estate” for the other’s branding and both partners reap the benefits.

In e-commerce, this partnership is typically comprised of the manufacturers that produce the product and the retailer who ultimately sells it online. Retailers have this so called real estate to facilitate the purchase, while manufacturers often have the funds, brand affinity, and customer loyalty to drive significant interest.

So, the question on the minds of both retailers and manufacturers is not if they should embark on an MDF investment, but how it should be done to capture the greatest ROI.

Innovative companies are turning toward “guided selling” to accomplish these goals.

What’s guided selling?

Guided selling is an engaging method for recommending products to customers. Retailers have long recognized the value of engaging shoppers in-store with educated and enthusiastic sales consultants. After all, shoppers are likely to check out with more in their carts—and leave more satisfied—when their questions have been answered and products have been recommended by knowledgeable associates.

Guided selling creates this experience online. It’s the philosophy of asking customers to provide insight into their wants, needs, lifestyles, or preferences and then recommending products based on those answers.

Guided selling tools—the actual applications that put guided selling principles into action—come in a variety of shapes and sizes

Interactive consulting tools truly emulate an experienced sales person. They focus on lifestyle and usage questions in order to recommend products.

Real-world example: Server manufacturers joined forces with one of the largest online technology distributors to developer a server finder on the distributors’ sites. Customers are asked questions about usage, volume of traffic, and location to determine the necessary specifications for that customer’s needs. The customer can then use the specifications to shop on a distributor’s site for the right server.

Mobile-guided selling apps allow brands to capitalize on the trend of mobile research by gleaning customer information in an interactive way and delivering product recommendations or personalized content based on the answers.

Real-world example: A popular beauty brand worked with a cosmetics site to develop a skin care consultation mobile app. Customers are asked questions about their skin types, skin issues, and desired outcomes of a skincare regime. Products are then recommended from the brand’s catalog to match those needs.

Product advisors help shoppers who know what they are looking for narrow down the choices using questions or filters.

Real-world example: A large online office supply retailer garnered MDF from printer manufacturers to develop an ink and toner finder customers could use to enter the make and model number of their printer. The tool recommends ink and toner to fit the customer’s specifications.

What kind of ROI can partners expect from investing MDF in guided selling?

  • Additional sales conversions: On average, retail customers can expect category conversion rates increase between 25% and 125% after customers use a guided selling tool. The varying range is largely dependent on the placement of the tool and its proximity to the shopping decision within the category.
  • Increased consumer education: Customers leave the guided selling tools knowing more about the products and how the products work together to meet their needs.
  • Deeper product discovery: By recommending products based on needs, shoppers are taken deeper into the product lines and also into related products, such a product bundles or accessories.
  • Valuable insights: Reporting from guided selling tools gives real-time insights into customers’ wants, need, preferences, and lifestyles. Reporting also shows which brands and products are driving conversions and affinity.
  • Decreased return rates: Guided selling tools direct customers to the right products, significantly reducing product returns up to 200%.

In a time when traditional advertising and marketing strategies are losing effectiveness, guided selling gives partner marketing teams a more effective way to utilize MDF to educate consumers, increase conversions, and drive lifetime value.

Eric Tobias is founder and president of iGoDigital.

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