This is a guest article by a leader in the brand protection strategy space.
While minimum advertised price (MAP) policies often seem like they are primarily pushed by brands, there are actually a number of reasons why retailers should welcome them as well. On the brand side, a strong MAP policy upholds brand value across selling channels. For retailers, avoiding margin depleting price wars is always the best course of action. And healthier profit margins are a win for both sides.
In such a competitive environment, finding middle ground is key to moving forward effectively. Below we’ll explain why MAP policies can provide just what brands and retailers are looking to accomplish.
Who Initiated MAP?
Brand manufacturers implement and maintain their own MAP policies. As such, those brands have occasionally become known as bullies, making difficult retailer relationship changes, or avoiding the confrontation of enforcement by hiring internal MAP Administrators and outsourcing the management altogether.
The good intent to preserve brand integrity and fear of price erosion are a couple of motivating factors in implementing a MAP policy. Some early policies were very strict with that goal in mind; think three strikes, you’re out. A rush of adrenaline coincides with a round of strike escalation notices by those brands, and they are ready to drop the ax.
Others are weak and ineffective, with suggestive consequences, and numerous warnings without punishment. Many policies have evolved to adjust to changes in the market, competitive, and retailers’ influences. As we know, a policy is only as good as the brand’s ability to monitor retail channels and enforce it, but the burden was always on the brand to care more about the long-term consequences of not taking action.
The Tides Have Turned
Where there may have been some reluctance from retailers in the beginning, we have seen an evolution in their behavior as well. First, there was some finger-pointing of who dropped the price first and push back on the policy with the need to compete on price and run promotions.
Greater MAP compliance rates (consistency on pricing for key products across sellers and online channels) quickly became evident for brands that actively monitored and enforced on violations. Retailers noticed progress and felt they could compete on an equal playing field. They began to appreciate being able to sell products at MAP or MSRP and the associated healthy margins.
Later, retailers not only expected brands to have a MAP policy, some even insisted on it. A shift came from the retailers that we still associate with major brick and mortar shopping. Housing a high volume of inventory across numerous locations was not financially beneficial if those products didn’t move due to online discounters diverting sales.
In some cases, retailers punished brands by cutting order sizes, charging brands for margin losses with chargebacks reaching six figures (see the consumer electronics space for examples of this), buying minimal inventory for store shelves, and having brands drop-ship their own product for online sales (look no further than the home improvement space).
MAP Is a Win-Win
Ultimately, guidelines and shared expectations are beneficial to both parties. Formed over years and decades, these retail “relationships” are mutually beneficial to provide consumers the best option to buy a quality product at a fair price and feel good about the purchase without the need to endlessly search for a better price. It’s a win-win.
What About Unauthorized Sellers That Discount?
For products with a well-managed MAP policy, a shopper will see price consistency across marketplaces and channels. If they have a favorite brick and mortar location, they can confidently buy the product there.
An option to buy slightly cheaper from an unknown online third-party seller is not always appealing. As shoppers are more informed and have higher expectations, a lower price can be a deterrent, as it raises suspicion on the quality of product and even its authenticity. Nonetheless, brands should be aware of unauthorized sellers and actively monitor their channels to identify them. These disruptors can fly under the radar and sometimes not be aware of a brands’ policies. Unfortunately, authorized dealers can go rogue and create an alias to hide their true identity. Contacting unauthorized sellers is the first step to mitigation, regardless of their relationship to the brand.
As polarizing as retail can seem, there luckily is a way for brands and retailers to meet in the middle. No retailer wants to offer constant discounts that eat into their profits. And brands don’t want to see customer perception take a hit when their products on reseller sites severely undercut their direct to consumer channels. Crafting and implementing mutually beneficial MAP policies helps brands and retailers find common ground that will make enforcement easier than ever.