Brands invest a lot of time, money and effort into crafting a narrative for their identities. Branding agencies, advertising agencies, and internal marketing departments work hard to make sure the story being told is one that entices customers.
Part of that story is pricing. Customers mentally attach certain intrinsic values to the price of a product. Higher prices are equated with higher quality, even at the lowest echelons. Consider the common wisdom of never ordering the cheapest bottle of wine on a sommelier’s menu, but going for the second cheapest bottle instead.
When a reseller cuts the price of an item drastically, it dilutes the brand value and conditions shoppers to expect lower prices from that particular brand. It can tarnish the brand’s image and make it hard to sell at a higher price again.
The damage that drastic pricing cuts can have on brand perception has been in the news recently, with Coach, Kate Spade, Ralph Lauren, and Michael Kors announcing that they would be pulling products from a number of department stores, in part because, according to Coach CEO Victor Luis “the high level of promotional impressions created negatively impacts our long-term brand health.”
In order to curb heavy price slashing, brands implement minimum advertised price (MAP) policies. Manufacturers use MAP to control how their brand and products look to the outside world, but retailers stand to benefit as well.
MAP policy enforcement helps:
- Promote fair competition across all distribution channels
- Maintain brand identity and value
- Allow smaller sellers to compete with larger retailers
- Prevent underpricing
- Protect seller margins
Brand perception and pricing are closely related, and monitoring resellers is the only way to uphold brand value when the products leave a brand’s warehouse. But as you know, retailers don’t have the best track record when it comes to respecting MAP.
The problem is worse on Amazon, easily the most competitive online marketplace, with a 33.1% rate of MAP abuse. Retailers aren’t inherently trying to abuse your policies. It has to do with the ultra-competitive eCommerce landscape.
When one seller lists a low price and others follow, brands are often left holding the short end of the stick. This can create a dangerous domino effect as one violation leads to more violations as other retailers fight to stay price competitive. That’s where MAP monitoring and enforcement come in to ensure brand compliance.
Brands take the time and energy to write up MAP policies, but that doesn’t mean that retailers always abide by them. A brand that knows how its products are being priced is able to address violation issues head-on before the violations escalate.
What Efforts Can Brands Take to Protect Themselves from MAP Violations?
Since manufacturers can choose who to do business with on the basis of price, imposing a policy is the best way to keep retailers in check when it comes to your pricing. The first step is building a policy that:
Covers All Your Bases
- Keep your price list updated periodically.
- Be sure to indicate that the retailer may not sell your item to another retailer who then sells it at a lower price.
- Define what qualifies as a violation. Whatever you don’t include in your policy can provide retailers with a loophole. Clearly define the repercussions of not following the policy, and clarify the channels that are applicable. For example, some brands do not consider “add to cart pricing” as a violation, but others do. Fine tune your policy to fit your brand’s standards.
- Make it clear what will happen if the policy is violated. Generally, brands will state that, at its sole discretion, they reserve the right to discontinue doing business with any reseller that advertises any product(s) covered by this MAP Policy at a price lower than the MAP. Some manufacturers include a “three-strike” rule of sorts, indicating the repercussions of each violation occurrence.
Incentivizes Retailers to Uphold the Agreement
- Acknowledge how important your authorized network is to your success.
- Explain the time and resources it takes to deliver an extraordinary customer experience, and your desire to protect their ability to do so. At the same time, discourage price-based advertising that would be detrimental to their service and support efforts.
- Make your MAP policy appealing to the retailer, including something like “We believe our MAP policy will allow retailers to profitably market and effectively promote the value of our products to customers”.
- Dedicate a MAP administrator at each retailer to report violations to, and to reach out to you if they have any questions regarding your policy.
- Explain how you will monitor your prices, and the steps you will take when a violation has occurred.
That last clause is incredibly important to validate that the policy will actually be enforced. Having a strong policy is meaningless if you have no way to enforce it, or if your resellers think you have no way to enforce it.