The tiniest spark can ignite great change, just like a finger knocking down a domino can lead to dozens more falling down the line. Chain reactions have the tendency to begin with a small change, and lead to drastic transformation that affects many others. This is definitely true in the online retail industry.
eCommerce is full of changes. Every day, retailers modify prices, costs, discounts, and more. These are all designed with great intentions, but the truth of the matter is that they ultimately affect unintended stakeholders, such as the manufacturers they purchase their products from. When retailers are fighting tooth and nail by cutting costs and depleting their margins, manufacturers pay the ultimate price.
That’s because price is directly correlated with brand value. Whether we as consumers acknowledge it or not, price definitely impacts our opinion of a product. If you see two bottles of wine, and one is more expensive than the other, we’re inclined to believe that because one is more expensive, there’s a clear divide in quality between the two. So when retailers are heavily discounting their products, the consumer’s perception of that brand is affected.
In order to protect the prices of their items and uphold their brand equity, manufacturers have implemented minimum advertised price (MAP) policies. These are agreements between retailers and manufacturers that essentially establish a price floor that retailers can’t advertise below.
In a perfect world, manufacturers could use the honor system with their retailers. But we know that no one is perfect, and sometimes retailers cut corners to make a sale. As a means of enforcement, many manufacturers monitor their products’ prices across their reseller network. They could manually do this, but it’s tedious and oftentimes inaccurate, since the market can change quickly. Automated price monitoring is the way to go, and here are a couple of reasons why:
Fast, Accurate Results
We’re only human, right? Humans are born with imperfection, it just makes us who we are. So when you entrust the task of price monitoring to your staff, mistakes are destined to happen. Automated price monitoring eliminates the margin of error, and is incredibly fast as well. But how? What does an automated price monitoring solution do that humans can’t?
Automated price monitoring solutions use data such as universal product code (UPC) to scan the web for all of your products. These are exact codes applied to products to help label and identify them.
Expose Gray Market Sellers
Gray market sellers are sneaky retailers that got their hands on your products without your authorization. Many times they’ll buy your products from a separate retailer and choose to resell them in their own store. These unauthorized sellers are hard to discover when you aren’t looking for them. But automated price monitoring systems are proven to find these sellers.
That’s because they scan the entire web for your products. They look in every nook and cranny for your product’s UPC. Gray market sellers are the most likely to abuse MAP because they aren’t listed in your network. They might think they can get away with violating MAP, or they may not even know it exists.
Preserve Brand Value and Price Perception
By pulling back data in real time, you can stop future MAP violations from ever occurring. This in turn can uphold your brand value and price perception as a manufacturer. When one retailer drops the prices of their products, many are destined to follow. And when that happens, your brand is cheapened by multiple retailers.
If you catch dozens of MAP violations long after they occurred, the consequences can be hard to erase. Consumers tend to notice price increases just as frequently as price decreases, and when they notice your products’ prices going up after a long time of being discounted, negative consequences may ensue. Not only was your brand cheapened, but it can’t hold the same price perception it once held in the eyes of your consumers. That can be avoided if you automate the price monitoring process.
Improve Future Business Relationships
By giving your MAP policy some enforcement, you can improve your negotiations with retailers in the future. Catching MAP violations as soon as they occur with an automated price monitoring system won’t make your MAP look flimsy to other sellers. Retailers will understand that they aren’t getting a shorter end of the stick than a competitor, and won’t accuse you of selling your products with different terms or prices. The uniformity can actually smooth out the selling process with resellers.
Not only will the negotiations be smoothed out, but competition can become less intense (at least on the pricing side of things.) Stopping MAP violations before it’s too late can curb price wars and extinguish any competitive fire between retailers. A mutually agreed upon floor may lead to intensified competition in realms beyond pricing.
Retailers slash prices like a gardener’s lawn mower cuts grass. The lawn mower can damage different things that get in its way, but it’s just doing its job. Retailers want to have the most attractive prices to entice customers and steer them away from competitors. The only problem is that manufacturer’s brand value is often reduced in the process.
An automated price monitoring solution can give your products’ prices a back bone to prevent future price wars. Retailers don’t cut prices with the intention to hurt your brand, it’s just an incredibly competitive industry. With automated price monitoring solutions, price wars can become a thing of the past and manufacturers can rest easy knowing that MAP violations can be automatically tackled.