Putting a product you worked hard on into another seller’s hands can be difficult. Will they give it the respect it deserves? Will they price it in a way that upholds your brand guidelines? Many manufacturers’ brand equity is fragile, especially if their products are earlier in the product lifecycle. And a lot of the time, the product’s price helps shape the overall brand value. To preserve this value, manufacturers establish MAP, or minimum advertised price policies.
Retail competition is fierce, especially online. MAP sets a price floor, established by the manufacturer, for retailers to abide by. With retailers constantly undercutting each other, prices are often dropped drastically to stay competitive, and brand images are tarnished in the process. With 20% of retailers violating MAP at all times, how can manufacturers keep their MAP policies enforced? And better yet, how can they prevent violations from happening in the first place?
Look for the Signs During the Deal
When you’re meeting with a potential retail customer, keep an eye out for signs that they might slash your prices after you sign a deal. Hold your positioning, negotiate, and don’t lose your ground. If a retailer keeps informing you that they can find the product cheaper from other suppliers, there’s a solid chance they want to sell it at a price that is lower than the one you have in mind. Ask the right questions, like “what if you end up selling less than you’re predicting?” or “what’s your desired margin?” The answers can give you an idea of their selling plans.
Set A Hard Price
Have you ever noticed that TVs are generally the same price across multiple retailers? That’s because many TV manufacturers have established a unilateral pricing policy. This means that the manufacturer can refuse to make further sales to retailers who sell below the set price. The manufacturer does not require an agreement from the retailer, and can pull the product from the retailer whenever they like. If you adopt this pricing strategy, your products will remain the same price no matter what store they are found in. Think of it as a more intense version of MAP. Be careful with the price, however. If it’s too high, retailers may choose to purchase from one of your competitors.
Tell Them You Enforce MAP
You went through the trouble of getting your resellers to sign a MAP agreement and they should be upholding it. However, just like when driving, when one driver chooses to go above the speed limit, others often feel the pressure to increase their speed as well in order to keep up with the flow of traffic. The problem is that in online retail, even if one retailer gets a “speeding ticket” (or notification of MAP violation), it doesn’t mean that their competitors will slow down. Provide screencaps for proof of violations, and if the reseller still isn’t respecting your MAP, it might be time for them to find a new vendor.
Price Monitoring Software
Once your products are in a retailer’s hands, how are you going to make sure they’re sold at or above your desired MAP? You could manually check every day on each website, but it becomes tedious and leaves room for error. Not to mention, retailers change their prices as often as 15 minutes. Luckily, price monitoring software can keep track of every retailer selling your product, and every price change that occurs. Doing this can help you alert retailers that are violating MAP, and even send screenshots for proof, stopping violators in their tracks.
How else can brands prevent a race to the bottom?
Contributing Writer: Brian Smyth