If you’re wondering whether your brand should invest in implementing a policy that establishes minimum pricing levels for your resellers, the answer is almost certainly yes. Such policies — assuming they are properly drafted and effectively and consistently enforced — provide manufacturers and brands with tremendous advantages. They protect the interests of your authorized resellers, preserve your margins, and help guard against the erosion of your brand’s reputation that could come from a public price war of your products.
But should you implement a MAP plan? That’s a different question altogether.
A Minimum Advertised Price (MAP) plan is a very specific set of policy guidelines and enforcement strategies that can be highly effective for some brands but the wrong plan for others.
This post will help you get a better sense of whether a MAP plan is the right reseller pricing strategy for your company. Start by answering the questions below. (The more yes responses you give, the more likely a MAP plan is the right reseller pricing strategy for you.) Then we’ll offer an explanation for each question and explain why they point to a MAP plan as the way to go.
3 Questions to Help Determine if You Need a MAP Plan
- Does your company offer cooperative advertising dollars to your resellers?
- Are you primarily concerned about how your resellers are advertising your products, as opposed to the actual prices they’re selling those products to customers?
- Are you primarily concerned with brand or price erosion coming from the behavior of your authorized resellers, as opposed grey-market or otherwise unauthorized retailers selling your products?
Your cheat sheet: If you answered yes to all three, then you’ll likely want to implement a MAP plan. If you answered no to all three, then you’ll probably want to implement a different strategy, such as a Unilateral Pricing Policy (UPP). Here’s why.
Question 1: Does your company offer cooperative ad dollars?
This first question is arguably the most important in determining whether your company should deploy a MAP plan or some other reseller pricing program.
Minimum Advertised Price policies typically focus on manufacturers or brands that offer advertising support to their resellers in exchange for those resellers following certain guidelines — such as advertising the brand’s products as prominently as it does any of the company’s competitors, and not advertising its products below specified amounts.
What’s important to note here is that in most cases, a MAP plan allows the manufacturer only a limited set of punishments for violation of these guidelines — and in most cases the primary consequence the brand has at its disposal is to cut off some (and not all) of its cooperative ad dollars to the violating reseller.
This is why, if your company doesn’t have a cooperative-advertising program, a MAP plan is probably not the optimal reseller strategy for you.
Question 2: Are you primarily concerned about how your resellers are advertising your products, as opposed to the actual prices they’re selling those products to customers?
Another key distinction between a MAP plan and other reseller policies is that MAP addresses only minimum advertised prices. It has nothing to say about the prices at which retailers actually sell your products.
As the law views the issue, any promotions of your products outside your reseller’s store constitute advertising. This would include physical mailers, coupons, or ads in newspapers or magazines. When a shopper walks into the retailer’s store, however, whatever promotions they encounter — e.g., in-store signage, product displays — are considered resale content, not advertising. This also means a salesperson or clerk at a bricks-and-mortar retailer can negotiate with a customer and actually sell her your product at any price the store chooses — even if it is well below your MAP-approved levels.
The lines get much less clear on the Internet, where some resellers will argue that once a shopper clicks into their site, they are technically “in the retailer’s store,” and that your MAP plan is no longer applicable.
This is why many retailers publish “See cart for best price” and similar enticements to shoppers. They determine a site visitor clicking into an online cart to be “shopping” in their store, and not viewing advertising.
The bottom line for you, though, is that if you’re concerned primarily about resellers publicly advertising your products at ever-lower prices — and less worried about those resellers actually reselling your products to individual customers at below your preferred levels — then you might want to implement a MAP plan.
Still, though, you will need to determine where your company is willing to draw the line between advertising and resale content.
Question 3: Are you primarily concerned with brand or price erosion coming from the behavior of your authorized resellers, as opposed grey-market or otherwise unauthorized retailers selling your products?
Finally, it’s important to note that because they are traditionally drafted as agreements — brand offers resellers cooperative ad support, and resellers agree in return to adhere to the guidelines — MAP policies offer enforcement teeth only to a brand’s legitimate, authorized retail partners.
This means that if you believe your products’ price erosion is (or could be) coming from unauthorized retailers — grey-market sellers who have no relationship with your company — then a MAP plan probably isn’t the right strategy for you.
After all, if a retailer has no relationship with your company, and has no business advertising your products in the first place, then you can’t threaten to withhold that unauthorized retailer’s advertising support — because you’re not giving them any support to begin with.
If Not a MAP Plan, Then What?
To recap, if your company doesn’t offer cooperative advertising money, if you’d like to have some say not only in the prices your resellers advertise your products but also how much they actually sell them for, and if you’re concerned about grey-market resellers, then a MAP plan probably won’t be your best strategy for protecting your brand.
In most cases, if a MAP plan isn’t the way to do, we recommend a Unilateral Pricing Policy — also called a UPP or sometimes simply a UP (for Unilateral Policy).
Still have questions? Looking for guidance on what to do next to develop your reseller pricing policy? Schedule a demo and let us show you how we can help.