Resellers are inundated with manufacturers looking to use the same sales channels to sell their products to consumers. What can you do to stand out, not only to consumers, but also to the resellers who carry and have the end responsibility to sell your products? How can you maintain a market value for your products when it feels like everyone is just in a race to the bottom? By leveraging a well thought out MAP policy, you can not only maintain the price and value of your products but can incentivize your resellers to help you stand out and increase sales.
First, we need to define exactly what a MAP policy is. MAP stands for Minimum Advertised Price. A MAP policy sets the lowest price for which a specific product or service can be publicly displayed. MAP policies are generally part of a larger agreement between the manufacturer and the reseller.
MAP Policy Benefits
There are a number of benefits when manufacturers set and enforce a MAP policy. Building a MAP policy helps manufacturers control how their products are priced in the market and higher margins when their goods are sold.
Without a MAP policy, resellers and sales channels can advertise and price the manufacturer’s products and services however they see fit. The lack of a MAP policy takes the control of product pricing and margins from the manufacturer and gives it to the resellers and market forces.
MAP upholds brand value by helping the manufacturer maintain a specific price point. A majority of high end products tend to have strict MAP policies to maintain the market price and perceived value. For example, 65” LG OLED and Samsung QLED TVs are very rarely ever sold under $2000. If you go to Amazon, Best Buy, or any other retailer, they will all have about the same price.
On the other hand, LG and Samsung TVs have lower end models that can be found for various prices at different retailers because they are not perceived as higher end, high value models. These models have less features, are inexpensive to manufacture and are mass market models that are meant to compete with other brands in that segment of the market at almost any price.
Both LG and Samsung implement a strict MAP policy on their higher end products which leads to a higher value and perception in the marketplace. On the other end of their product line, there might not be a MAP policy or a very lenient policy in place to reflect what competitors in this space might be doing as well. This market segment tends to focus more on market share instead of high margins, profitability, and high end perception.
Effective MAP Policies
MAP policies vary by manufacturer and industry. Policies range from a strict enforcement to a series of actions resulting in a manufacturer blocking a reseller from selling their products. For example, in the headphone market, Bose and the Beats by Dre from Apple tend to have a very strict enforcement policy to maintain price and margin control on the high end of the market. If a reseller advertises one of their products below MAP, Bose and Apple tend to immediately block a reseller from selling their products. Both Bose and Apple have their own stores and direct sales channels as well, so there is more flexibility in their strategy.
On the opposite spectrum, there are some manufacturers that have a more flexible policy that focuses more on warnings and notification of the violation. These brands work directly on the reseller relationship to drive down the frequency of violations. Instead of strict enforcement, the manufacturers work closely with the resellers to discuss and strategize why there was a violation and what they can do as partners to avoid it in the future. This type of relationship with resellers also helps the manufacturer identify the first channel that violated and could have caused subsequent violators due to competition.
Most manufactures tend to implement policies in the middle of that spectrum. For example, when monitoring reseller adherence to MAP policy, there is usually a written or verbal warning for the first violation. From there, there might be a 30-day shipment hold on the products that are repeatedly violated. This could continue to escalate to a 60 or 90-day hold and eventually would lead to the manufacturer blocking the reseller from selling the product.
Most manufacturers measure MAP violations on the percent depth of the violation and frequency for each reseller. Both of these metrics can provide a manufacturer a very clear view of which sales channels consistently follow their MAP policy and help them retain their pricing and margin in the marketplace. Manufacturers can use this type of MAP violation data to identify their top reseller channels and set up incentives.
Monetizing sales goals is a very effective way to incentivize resellers to drive your product through their sales channels. Similar to how sales teams at the manufacturer are incentivized by sales milestones with bonuses and accelerators, manufacturers can set up a similar structure with their resellers to drive sales and meet their company’s revenue goals.
For example, a manufacturer can set a structure where they earn an additional 5% bonus on all of their previous sales if they meet 100% of their sales goal. If they meet 125%, it moves up another 2% and can scale even further. If the sales goal is $1,000,000, that can mean the channel could earn $50,000 on 100% and $70,000 on 125%. These amounts can scale depending on the size of the reseller channel, percentages, and revenue. You can also opt for a strict monetary bonus that is not a direct percentage of revenue.
Other ways to incentivize resellers and ensure the success of your MAP policy include the following:
- Exclusive product versions and specific SKUs only sold through a reseller
- Exclusive product launches with availability through a reseller for a limited time
- Dedicated product marketing
- Cross-branding marketing campaigns
These are several popular examples of reseller incentives and this list is by no means all inclusive. Ultimately, incentives are used to help you stand out and leverage resellers to sell more of your product.
If a manufacturer is implementing these types of incentives and other competitors in their space are not, resellers looking to increase their own revenue and drive traffic towards their business will end up focusing on selling the products that benefit them the most.
An effective and fair MAP policy can help you maintain brand value in the market. Adding monetary, product exclusivity, marketing, and other types of incentives to your MAP policy can help give manufacturers an edge in the market and increase revenue. The ideas listed above are just the beginning. These incentives will help manufacturers further develop relationships with resellers and can help everyone become more successful in the long run.