In the digital world, manufacturers, brand owners and retailers are tracking competition to make pricing decisions, maintain prices, protect margins, and detect unauthorized sellers. Savvy shoppers, on their part, compare prices online to make shopping decisions, so maintaining prices becomes crucial for manufacturers.
The MAP Strategy
Manufacturers and brand owners often choose to influence prices through a pricing policy called Minimum Advertised Price (MAP). MAP is a policy that a manufacturer or brand owner applies to each of its retail sellers that defines the lowest price at which the retailers can advertise a specific product. This means that if the policy defines the MAP of a certain product at $10, then all sellers must advertise this product for at least $10. Note that retailers cannot advertise it for a lower price, but they can sell it for as low a price as they want.
By setting MAP, brands set bounds on advertised prices by their downstream partners, across both online and brick-and-mortar retail.
There are various benefits to having an effective MAP policy.
Maintaining prices allows better control of margins and bottom line. It improves brand perception: it builds trust, while also protecting the product’s perceived value in the eyes of the shopper. Avoiding price erosion is beneficial for both manufacturers and sellers.
MAP also helps manufacturers protect their authorized distributors and partners, and build a stronger business relationship with those who follow MAP.
MAP policy may deter large retailers from lowering the price as much as they wish, and so it helps manufacturers place all their retailers on equal footing. Since retailers cannot drive sales by cutting prices, a strong MAP policy will push them to find alternative ways to provide value, such as customer service and support. If a retailer does find ways to add value, he doesn’t need to worry about pricing wars with the competition.
MAP and eCommerce
MAP policies apply to all retailers, but they affect ecommerce retailers somewhat differently than they affect brick-and-mortar retail.
The most important aspect is the “advertised price”. Retailers operating solely or primarily online are required to comply with MAP in Google, landing pages, product pages, and product comparison pages.
This is significant as online sellers often turn to discounting as a means to drive sales against numerous alternatives, many of which are easily available to online customers. This discounting may work in the short term, but it can be very damaging for the brand later on.
As comparing prices is easier online, retailers may choose to lower prices to gain sales. When big players do this, it may be without much consequence for them, while smaller players know they should either abide by MAP and lose the price war or risk losing the product. A way for brands to fight back is to draw a clear MAP policy and publicly release it. This way their guidelines are applied to every seller equally. It demonstrates commitment to their policy, and it makes enforcement easier.
MAP can protect authorized sellers and distributors and strengthen the business relationship with the manufacturer. Brands may offer support to complying authorized sellers, such as giving them priority in supply. But compliance can also be a condition for a retailer’s continued access to the brand’s goods, such as in the form of termination of distribution agreement.
Unauthorized retailers, that have no formal relationship with the manufacturer, are not bound by MAP and they are more likely to violate it. If they lower prices, it is more likely that other retailers, both authorized and unauthorized, will do the same to compete. This usually results in yet more MAP violations, and the manufacturer losing control of pricing.
In reality, MAP violations are common. A recent research on MAP policies found that up to 40 percent of retailers never complied with MAP.
To deter sellers from violating MAP, companies should have clear policies, which they monitor for compliance, and take action in the event of violation.
Credible monitoring is the first step in standing behind MAP in the digital world, and this includes all sellers in all channels.
Once non-compliance is found, punishment should also be credible so the manufacturer will be able to enforce it. For example, for a first offence, a company may send a written warning. If the retailer doesn’t comply, it’s recommended not to send further warnings but to act and suspend the non-compliant distributor for a pre-determined period of time or otherwise stop doing business together. Furthermore, if the retailer still has products and doesn’t comply, the manufacturer can file a cease and desist order. However, when it comes to unauthorized sellers, sometimes the best way to stop them is to track down their supply chain and penalize their authorized supplier.
Wiser MAP Enforcement
Constantly following the online market may seem like a daunting task, but it is crucial for enforcing MAP policies.
A practical and cost-effective solution is to deploy an advanced price tracking software, backed by online research and human expertise. Wiser Market’s system constantly monitors numerous eCommerce channels to identify sellers in violation of MAP or territory agreements. Following monitoring and detection, our team of in-house experts analyzes the listings to determine the best way to enforce your MAP.
Although it is easier to approach authorized sellers to enforce MAP policies, it is not impossible to remove listings of unauthorized sellers off the market. Making unauthorized sellers work a lot harder to sell your products often interprets into increased sales for you.
Wiser Market is your solution to MAP monitoring and enforcing, deterring sellers from future violations and helping you gain control of your brand.
Are Your MAP Policies being followed? Contact us to find out