So, you want to roll out a Minimum Advertised Price (MAP) program, but you have no idea where to start.
Nobody in your company has any experience writing a policy like this, or knows where the legal pitfalls are (and there are plenty!), or has any sense of what guidelines and consequences to include. You’re not even sure if MAP is actually the best policy for your company, or if you’d be better served by a different type, such as a Minimum Resale Price (MRP) policy.
This post will walk you through the very first steps you need to take to get from where you are right now… to a solid reseller pricing program ready to be rolled out.
Step 1: Identify the Problem
Rolling out an effective reseller pricing program – whether it’s based on MAP or some other policy – requires that you first clearly understand the problem you’re trying to solve (or prevent from happening in the first place). And that process starts by naming the problem.
Start by asking yourself and your team a few questions, such as:
- Are we concerned primarily with preventing the advertised prices of our products from dropping below certain levels?
- Where would we be comfortable drawing the line at what constitutes an “advertised” price online – only on our retailers’ sales pages and ads, in texts or emails or in the shopping cart as well?
- Are we interested also in controlling the prices our retail partners actually sell our products, or do we not worry as much about any private negotiations a retailer might have with a customer over our products’ pricing?
Answering questions like these will help you focus in on the specific challenges your company is facing, and the goals you have for your pricing program. They will help you determine which type of policy to draft and enforce (which we’ll discuss more below). And they’ll help you prioritize the rules and guidelines you include in the policy.
Step 2: Identify the Villain
If you’re researching reseller pricing policies, then it’s safe to assume your brand already has a villain – maybe several of them.
Maybe your villain – the primary threat to your company’s reputation and brand value – is a group of gray-market sellers who are somehow getting their hands on your products in bulk and then selling them online using lousy sales pages, deeply discounted prices, and misleading ad copy.
Or maybe your villains are just a few legitimate retailers who keep advertising your products for less than the prices you’ve asked them to use as their floor. And maybe you’re dealing with a combination of these and other types of villains in your resale channel.
Just as you did in Step 1, you’ll want to narrow in on the major threats to your brand by asking yourself some questions:
- Are we already seeing price erosion of your products, and can we trace the source of the problem?
- Are our distributors or wholesalers selling to shady retail companies, who are in turn discounting our products below levels we find acceptable?
- Do we even recognize these sellers who are violating our policy? (Sometimes gray-market sellers or even authorized retail partners will sell products under phony company names, which allows them to violate manufacturers’ policies without jeopardizing their relationships with those manufacturers.)
- Are we seeing any counterfeiters passing off knockoffs of our products as the real thing? Can we trace the source of these counterfeiters?
Again, before you can develop the right pricing policy and program to enforce it, you need to know where the problem is originating and who’s responsible. If you’re not sure of the exact scope and source of your problem, you may want to contact TrackStreet and have us find out for you.
Step 3: Select the Right Policy
This step might require you to consult with brand protection professionals, particularly if neither you nor anyone in your organization has experience with reseller policies. We also have a brief online guide to help you determine if MAP is the best policy for your company, and we’ve written a post describing the differences among the many types of reseller policies.
Whichever way you decide to research the policy options available to you, this is one of the most important steps in this process, and one of the most often mishandled by well-meaning manufacturers and brands that just don’t know what their options are.
Do not simply default to a MAP policy. That might in fact be the ideal framework for your company to control your products’ pricing and protect your brand. But what if there’s a better fit for your specific needs?
Your ideal policy will be different, for example, if you want to control only how your products are advertised, versus if you want to control both how they are advertised and sold.
If you simply grab a MAP policy template from the Internet and add your company’s name (a mistake many manufacturers have made), you might find you are enforcing the wrong policy for your company’s needs and goals.
Step 4: Draft and Publish Your Policy
For this step, we highly recommend you work with professionals when drafting your policy, or at least having them review the policy you write in-house before you send it to your resale network. You can use either antitrust legal counsel or experts at price monitoring and brand protection.
The actual written policy itself will ideally be only a couple of pages and relatively easy to read and comprehend. But don’t be misled into thinking this means that drafting it will be easy.
These policies require a delicate balancing act of articulating clear rules and consequences while not chasing away resale partners. They also require a thorough understanding of antitrust law and how to avoid legal problems.
For these and other reasons, we recommend you don’t try to draft your policy in-house, but instead work with professionals.
Step 5: Roll Out Your Monitoring and Enforcement Program
You’re almost there!
At this point, you’ve thought through the key issues we discussed above surrounding your resale network and how best to protect your brand. You know the specific problems you’re facing (resale price erosion online, for example), and you know the villains responsible (those rotten gray-market sellers).
You’ve selected the best policy for your unique set of circumstances, and you’ve drafted and published the written policy laying out your new guidelines for your resale partners.
Now it’s time to back that policy up with monitoring and enforcement. You’ll have plenty of options here, just as you did with the other steps in this process. So to figure out the enforcement strategy that best fits your company’s needs, budget, culture, and priorities, you’ll once again need to ask yourself some questions:
- Do we want to try monitoring our products’ pricing manually? Or will we want to automate the process?
- Which employees will we assign to oversee this monitoring and enforcement strategy?
- How will we communicate this new policy across our company, and what responsibilities will we assign to which people or departments?
- Do we completely understand the legal implications and potential pitfalls in enforcing the rules in our policy? If not, how are we going to get help to make sure we don’t make a mistake that puts the business in legal jeopardy?
- Are we prepared to stop selling to a reseller who is violating our policies, even if they are one of our biggest customers?
Implementing an effective enforcement strategy will probably be the stage of your reseller policy rollout requiring the most thought and planning.
If you’d like to learn how to make the process – and all of the steps outlined here – much simpler, let us give you a free demo.