Online marketplaces can be extremely powerful revenue-generating channels, but due to their nature, they can also be places where your prices are slashed beyond the acceptable amount. This means diminished margins and possible reputational damage for you.
That’s why you need a strong minimum advertised price policy that helps you stop MAP violators and establish price policies everywhere your products are sold. There are a few ways to do that, and one commonly discussed strategy is known as “First-Violator MAP enforcement.”
But what does that mean? And why might you want to consider other means of enforcing your MAP policy?
What is First-Violator MAP Enforcement?
First-Violator MAP enforcement is based on the theory that if you catch and punish the first seller in violation of your MAP agreement, you will be able to stop others from following suit and lowering their prices below MAP as well.
The idea here is that if you can stop the first violator in their tracks, you can prevent a cascading effect where other sellers react to the first violator by dropping their prices below your specified MAP. If you can stop all of the first violators and punish them appropriately, all of the rest of the sellers will fall into line and be perfectly compliant with the MAP. So the logic goes.
First-Violator MAP enforcement is based on the theory that if you catch and punish the first seller in violation of your MAP agreement, you will be able to stop others from following suit.
Problems with First-Violator MAP Enforcement as a Strategy
The strategy of catching and sanctioning the first violator can sometimes be effective. If an authorized reseller commits a MAP violation, and you’re able to catch them early enough and enforce your MAP policy, it may stop other legitimate resellers from engaging in the same behavior.
The shortcomings of this strategy become apparent when you consider that you may not be able to take action on that first offender quickly. For starters, if you have several resellers violating your MAP policy, you may not be able to trace the problem to its source. Beyond that, First-Violator MAP Enforcement makes a pretty unrealistic assumption that stopping the first violator means that the reseller will never dip below your authorized prices again.
There are a lot of reasons why sellers would commit a MAP violation. If they have excess inventory and want to use markdowns to clear it, they may use rock-bottom prices to do so. In other cases, they may want to try to be extra competitive during peak seasons.
Another risk is that you can be seen as favoring some resellers over others in the event you have multiple MAP violators. Punishing one seller because they happened to be caught first but not another can open you to accusations of unfair competitive practices.
All of this is to say nothing of the unauthorized resellers of your goods, who by definition are violating a lot more than your MAP policy.
Strategies for MAP Enforcement
So what are some alternative strategies for MAP enforcement? Here are a few:
Re-evaluate Your MAP Policy
Not all MAP violations stem from resellers going rogue. In some cases, violations occur when MAP policies are unreasonable. One thing you can do is offer some flexibility around your MAP policy. For example, you can allow resellers to go a certain percentage below MAP if needed, and only count the violation if they go beyond that. Another strategy is to institute MAP holidays during key shopping seasons. This gives retailers some flexibility and the ability to stay competitive.
Likewise, it could be that your MAP policy isn’t strict enough. If the penalty for a violation is worth the potential gains, it’s a no-brainer for a retailer to simply look at the minor punishment as a cost of doing business. Be sure the penalties are enough of a deterrent before you have to start worrying about violators.
Treat all MAP Violators Equally
Singling out a single MAP violator is usually a shortsighted solution that leaves you open to future issues with MAP violations. A better strategy is to have a strong MAP policy that is equally enforced across all authorized and unauthorized resellers. This is how you maintain consistent deterrence, rather than playing the game of whack-a-mole whenever a violator appears. This will prevent any accusations of unfair practices and will also ensure that the problem is solved on a more permanent basis.
Monitor Online Retailers for MAP Violations
Online retail and third-party marketplaces add a whole new dimension to MAP monitoring that didn’t exist in the brick and mortar era. Brands and manufacturers must constantly monitor their online resellers for MAP violations to preserve their margins and reputations.
MAP monitoring shows you all of your product’s prices across all of your online resellers. This makes it much easier to detect noncompliant sellers and request corrective action quickly. Authorized sellers benefit as well when you ensure a level playing field.
MAP enforcement is a crucial part of success for brands and manufacturers. By understanding all of the strategies at your disposal for detecting and stopping MAP violations, and preventing them from happening again, you will protect your margins, your brand, and your relationships with your legitimate sellers.