Minimum Advertised Price (MAP) policies and agreements have become a requirement for many brands selling online in the United States. They aim to keep resellers in line with price and content requirements spelled out by the brand. Having a MAP policy is the first step toward stopping MAP violators with many more that follow.
Once you have out a policy in place, you’ll need to monitor for MAP violations to ensure sellers are compliant on an ongoing basis. After all, they have your brand value in their hands. But all resellers won’t adhere strictly to your policy and the crux of today’s article is what your options are when you inevitably find those MAP violators.
Why Brands Should Go After Violators
Data is good, but action is better. MAP violations are rampant across the retail landscape and one violation can lead to a domino effect, with competitors dropping their prices to stay in the race to win sales. Whether resellers simply made a mistake or are acting in bad faith, your brand value takes a hit all the same.
There are a few major reasons why actively going after MAP violators will benefit you.
- It will uphold your brand perception: Brands work hard to build integrity and quality products with a price point to match, some over decades. Online sellers that have nothing to offer besides a low price disregard these efforts. They may also disregard your quality standards and ultimately the value of your product in the eye of the consumer.
- It will strengthen your relationships with your best resellers: The best resellers never (or seldom) violate your MAP policy. Knowing who your most loyal resellers are can help you determine who should get your product exclusives and which sites you might want to up your ad spend on. And having a strong MAP policy will incentivize your resellers to carry your products.
- It will protect your direct to consumer channels: If a reseller cuts prices dramatically against your MAP policy, your prices will become noncompetitive. Shoppers will go after these lower prices and ignore your direct selling channels. Pinpointing when and where these violations happened will shore up your profit margins on your direct channels.
Ways to Find MAP Violators
The first step towards putting an end to MAP violations is knowing the who, what, when, and where. Finding this information either is a manual process, which becomes less viable as SKU count increases. Or, it can be an automated process carried out by a third party vendor or with a homegrown solution. The way you unearth MAP violators is besides the point. Instead, finding in an efficient and repeatable manner is what matters most. Once you are armed with that data, it’s time to present it to your resellers with a clear list of action-items.
What Brands Should Do with a MAP Violator
What you plan to do about violators depends on a number of factors, such as your market position, frequency and depth of violation, and, of course, what is outlined in your MAP policy. It is best to have a MAP policy that clearly spells out what happens in the event of a violation. For example, issue a warning after the first violation, a 30 day shipping hold on key products after the second, and so on all the way to no longer doing business with them. There are a number of ways to punish a reseller that violates your MAP policy, such as reducing ad spend or shrinking your assortment on their site.
The nature of your relationship with a reseller will also play a large role in how you should approach the violation. With an unauthorized (also known as a gray market seller) reseller, you have less enforcement power since they are unaware of your MAP policy. Nonetheless, you still need to know how they are getting their hands on your product. One way to accomplish this is through “test buys” in which you buy one of your brand’s items on their site so that you can look at the packaging to see who is shipping and use that to track down the source. Often, it’s a distributor that is trying to offload excess inventory. Sometimes they are counterfeits posing as your products.
The nature of your relationship with a reseller will also play a large role in how you should approach the violation. With an unauthorized reseller, you have less enforcement power since they are either unaware of your MAP policy, or are aware and disguising themselves.
Nonetheless, you still need to know how they are getting their hands on your product. One way to accomplish this is through “test buys” in which you buy one of your brand’s items on their site so that you can look at the packaging to see who is shipping and use that to track down the source. Often, it’s a distributor that is trying to offload excess inventory. Sometimes they are counterfeits posing as your products.
Fighting back against these unauthorized sellers means using material difference to your benefit when they try to claim immunity under the First Sale Doctrine (if the brand is claiming that the unauthorized seller is violating their established product patents). Brands can leverage warranty, customer support, promotions, or quality controls to prove in court that the items the unauthorized seller is offering are defrauding unknowing shoppers (while also hurting your brand value and loyalty).
Even though your relationships with different resellers may differ, handling MAP violations systematically will help you avoid claims that your negotiations constitute an agreement in restraint of trade. Instead, ironclad requirements, predetermined consequences, and even-handed enforcement is a better course of action. One way to bake in consequences is to include advertising co-op dollars in your MAP policy, so if a particular reseller violates MAP, a brand can halt ad spend without have to take any sort of legal action.
Taking MAP Enforcement Further
After you find unauthorized sellers and find out their identity, the next step is to directly enforce your MAP policy, cut off product access, or even revoke their authorized seller status in previously approved retail channels. Getting the most egregious violators in line should help reset pricing across marketplaces.
Clear communications with seller and distribution partners and tight control of distribution are critical to a successful MAP program. Actively perusing unauthorized sellers and even cutting of a larger retailer that won’t comply send a clear message about your commitment to protecting your brand and loyal retail partners.
International Pricing Violations
While MAP is only valid in the United States, in Europe and beyond it is possible to apply these strategies to MSRP. For example, a rebate program may be an effective incentive for retailers to follow your pricing expectations. Say a pair of headphones is presented to shoppers for $100. Under normal circumstances the manufacturer sells to the retailer for $50 and if all goes well, the reseller gets $50 profit. The way this rebate works is that the manufacturer agrees to sell the headphones to a retailer for $75, and when the manufacturer sees they’ve sold it for $100, the retailer gets a rebate for $25. If the retailer decides to sell them for $85, then they will only get a rebate of $10. This helps manufacturers manage profit margins by incentivizing the retailer to follow their pricing guidelines.
MAP violations need not put a damper on your online sales. Gaining compliance from your resellers is possible with the right cadence of monitoring and communication. Your brand value is at stake and taking action on MAP violations in a timely manner puts you in the driver’s seat of your brand’s future.
Need better data to inform your decisions? Whether in-store or online, Wiser has you covered from pricing to assortment to promotions. Schedule a meeting today to learn how to turn retail data into action.