If your team is preparing to draft a minimum advertised price (MAP) policy to better manage your products’ pricing online, and you’ve begun researching the minimum advertised price policies of other manufacturers and brands, you’re probably feeling quite confused.
In fact, the more of these policies you’ve reviewed, and the more articles and essays you’ve read from pricing-policy “experts,” the less confident you likely feel that you have any idea about how to draft your own policy.
Your confusion is completely understandable. When it comes to minimum advertised price policies, the Internet abounds with conflicting, outdated and just-plain incorrect information.
In this post, I will focus on one important aspect of a minimum advertised price policy: Determining what your company is going to consider a violation, and crafting the right language regarding both the violation itself and your company’s consequences for a violating reseller. (For a more thorough consultation on developing and enforcing your reseller pricing policy, contact us anytime.)
Before you draft your minimum advertised price policy: what you need to know
Before launching into that discussion, though, I want to make two key points that might also affect how (or even if) you draft your minimum advertised price policy:
1. A MAP policy is the right reseller-pricing program to implement only if your company offers cooperative advertising dollars to your resellers.
Before you spend time and resources drafting a MAP policy internally or paying a law firm to draft one for you, you should know that MAP policies typically focus narrowly on cooperative ad dollars. If your company does not offer such ad support to your resellers, then you are probably better served drafting a unilateral pricing policy (UPP), sometimes also called a unilateral policy (UP).
2. There is no one-size-fits-all MAP policy for every manufacturer. You need to draft yours based on your company’s unique philosophy and reseller network.
Properly developed MAP policies differ from manufacturer to manufacturer, and for good reason. Determining where your company wants to draw the line in terms of what constitutes a violation, for example, will depend your specific circumstances, and how much leeway you want to offer your legitimate resale channel. Keep that in mind before copying a MAP template you find on the Internet.
What actions will constitute a violation of your minimum advertised price policy?
When it comes to brick-and-mortar retailers selling your products in their stores, you probably know that the law tends to draw the line between “advertised price” and “resale price” at the store’s front door. In other words, any ads featuring your products that the retailer takes out in the local newspaper, any coupons it mails to customers’ homes, or any outdoor signs it posts listing your products will all constitute advertised pricing.
Once the customer walks through the retailer’s front door, however, any pricing that shopper sees or hears — including a negotiated price with an in-store salesperson — will be classified as resale price, and generally speaking not subject to your minimum advertised price policy.
This issues gets far less clear when it comes to online selling. What constitutes the “front door” of your online reseller? Their website’s sales landing pages for each of your products? The sales listing pages they’ve published on digital marketplaces like Amazon and eBay? Where, if anywhere, can an online retailer selling your products actually offer them below your MAP levels — because they would now be classified as resale price and not minimum advertised price?
The answer, unfortunately, is that it depends.
You know the standard promotional practices that often have the effect (sometimes intentionally, other times not) of undermining the manufacturer’s pricing policy:
- Offering “Click here for lowest price” or “See discounts in cart” options to take shoppers away from the main sales page — and, the retailer hopes — out of view of the manufacturer’s enforcement programs.
- Offering “rebates” on a product, not authorized by the manufacturer or brand, and which will bring the true cost below the minimum advertised price level.
- Offering non-approved product bundles, where the retailer combines a MAP-protected product with another product where the total price is below the amount the products could have been purchased separately.
- Distributing coupons offering “20% off of everything in the store” without specifically excluding those products and brands protected under a MAP policy.
Regardless of whether the retailers engaging in these practices are intentionally trying to work around a MAP policy or acting in good faith and simply unaware of their violation, the result to a brand will often be the same.
Such practices, if allowed to repeatedly undermine an existing minimum advertised price policy, can chase away honorable retailers who decide it is no longer worth carrying and investing the brand if gray-market retailers can unfairly undersell them. These practices can also, over time, have the effect of undermining the public’s perception of the brand — its products are, after all, always available at discount-bin prices.
So your company will have to determine where you want to draw the line. The guidelines you set for your resellers, and how you enforce them, should depend on your relationships with your resale channel, whether your company has had price-erosion problems in the past, particularly on the Internet, and a host of the other factors that will be specific to your business.
Here are some key questions you should ask yourself to help get your team started figuring out the type of price policy you want:
- Do we want to allow resellers to offer in-cart pricing that takes the final price below our MAP levels?
- Will we consider it compliance with our MAP program if a reseller offers a storewide discount or coupon that effectively brings the price for our product below our MAP level?
- Do we want to allow our resellers to include financing options for our MAP-protected products?
And perhaps most important, because if the answer is no you probably want a unilateral policy instead of a minimum advertised price policy…
- Are we going to offer our resellers cooperative advertising dollars in exchange for their compliance with our MAP program?
What you need to know before drafting the language regarding dealing with violations of your minimum advertised price policy
Finally, assuming you have determined that a minimum advertised price policy is the right strategy for your program to manage reseller pricing, you need to know that the only recourse you can take for any action you determine to be a MAP violation will be to withhold some of your cooperative advertising dollars.
MAP policies are built specifically around cooperation between a manufacturer or brand and its reseller. The brand offers advertising support to the reseller, and the reseller in return promises to adhere to certain behaviors including keeping its advertised prices at or above the MAP-approved amounts.
But because these agreements are established on the brand’s offer of ad support, that is the only basis on which the brand will be able to punish its reseller.
In other words, if you are going to draft a minimum advertised price policy, you need to satisfy at least these two criteria. First, your program will have to include your providing some amount of agreed-upon financial support for your reseller’s advertising, and second, you will have to limit your policy’s consequences to holding back some of those ad dollars.
If all of this still seems confusing, and you are still concerned that a mistake in drafting or enforcing your pricing policy could land your company in legal jeopardy — which it could — your best bet will be to work with a trusted Internet brand protection expert. Let us give you a free demo.