The selling ecosystem has only gotten more complex as savvy shoppers compare pricing and selection online and off to decide how, where and for how much they will ultimately make their purchase. At the same time, resellers are investing in technology that enables them to spy on other retailers and play the pricing game. This behavior erodes the margin for brands and even worse, can damage reseller relationships.
According to Pamela Springer, CEO of ORIS Intelligence, a company which helps manufacturers preserve pricing integrity, simply monitoring the major online retail sites and marketplaces is not sufficient to protect your company’s Minimum Advertised Price (MAP) policy. In fact, she notes that sites like Amazon are not generally the first to drop prices below MAP; instead, they are nearly always price matching another vendor who lowered the price of the product first — and that may be a seller you don’t know exists. By the time the large retailers have violated MAP, you could face a major problem. Often, brands don’t understand the full impact that e-Commerce has on other sales channels, until it’s too late. While the Internet provides more opportunities for sales, it also makes it far easier for unauthorized sellers to become part of the channel.
Who is Impacted?
Springer says the typical brand has over 77 domains selling its products — and on average, nearly 23 percent of their products endure pricing violations. Moreover, the average discount on products is fully 17 percent below MAP. “Overall, of the industries ORIS represents, consumer electronics brands have the highest average violation percentage at 20.5%. Approximately 80 percent of the industry’s sellers are unauthorized. Of these unauthorized sellers, 75 percent are smaller individual sellers (3rd party) going through other marketplaces — mostly Amazon, eBay, and Walmart. The industry with the second highest average violation percentage is housewares at 20 percent, while outdoor industry brands have the highest average seller count, at 210 average sellers per brand,” Springer explains.
Why it Matters
When pricing is an after-thought and not the foundation of a business plan, authorized sellers can get very pushy with brands. This style interferes with productive conversations between the brand and their retail partners about upcoming products and other important marketing considerations. “Many times, the brand’s sales team gets ‘bombarded’ with pricing issues that derail other conversations, including preventing the retailer taking on more products to sell from the brand,” Springer says.
How to Manage Channel Complexity
“To help with this growing channel complexity, brands are embracing a MAP policy,” Springer explains. “Authorized sellers agree to the policy and in return, the brand agrees to enforce their pricing. As a result, the margin is preserved for the seller while unauthorized sellers are taken out of the commission paradigm. The enforcement of MAP is good news for all involved.
As a representative example of the impact of controlling MAP, a recent ORIS customer in the consumer electronics space had a 31 percent decrease in URLs in violation of their policy after only 6 months active MAP enforcement. Depending on the volume of sales and the scale of your problem, this type of drop could be extremely significant.
Benefits to each party include:
- The Brand
- Preserve the premium nature of their brand;
- Identify and eliminate unauthorized sellers (i.e., over distribution);
- Provide consistent pricing across all sellers (eliminate perceived commoditization);
- Sell more because their good partners stock more.
- The Retailer
- Protects margin so the product can be properly advertised and supported;
- Stocks more knowing they can be competitive on service versus only on price;
- Eliminates unauthorized sellers so legitimate retailers can sell more.
- The Consumer
- Enables buyers to find genuine, non-counterfeit products easily;
- Purchases from an authorized seller who provides warranty and ‘after sale’ support;
- Learns to trust and drive loyalty to a brand.
If your organization has not set up a MAP policy, Springer suggests you learn how to establish a MAP policy here.
What Steps Can Help:
The good news is that every brand can take steps to regain control, and a few simple steps can set everyone on a better course:
- Roll out a MAP policy for your authorized sellers that outlines what is not allowed in selling your products. “Keep in mind that coupons, in-cart-pricing, and other pricing “games” are common among sophisticated sellers. Your MAP policy needs to cover these scenarios — and clearly articulate that these are violations,” Springer notes.
- Monitor the entire web: “Make sure you’re enforcing pricing in a comprehensive way; brands need to enforce MAP across the web, including marketplaces. Springer advises, “Utilize an automated software-monitoring tool to help you monitor and enforce across the entire web.”
- Thin the herd: Building your business with trusted sellers is the only smart way to go. “Identify and eliminate unauthorized sellers so that your partners get the business. It’ll help with preserving your brand and credibility, as over-distribution and inconsistent pricing will no longer be a factor,” Springer concludes.
Ultimately, the commitment a brand makes in enforcing its pricing will be a key factor in determining their ability to attract and retain quality retailers for their premium brand. “MAP only works if it’s enforced,” Springer points out. “Online is here to stay. Having access to what’s happening with your products online will help insure that online and offline can cohabitate, and in fact, leverage each other rather than cannibalize one another.”
Article’s author Kate HarrisonK
