Can a Minimum Advertised Price Policy Really Stop Unauthorized Resellers?
Strictly speaking, the answer to the question posed in this article’s title — “Can a minimum advertised price policy really stop unauthorized resellers?” — is no.
That’s because a true minimum advertised price (MAP) policy has two key characteristics that would render it essentially meaningless to a gray-market retailer who has no relationship with the manufacturer or brand owner:
– A true minimum advertised price policy should be published and enforced only if the manufacturer is offering cooperative advertising dollars to its resellers.
– A true minimum advertised price policy can be enforced only by withholding some of that cooperative advertising money from resellers who violate the policy.
As you can see, neither of these elements — not the promise of ad dollars, and not the threat of withholding that money — will matter to an unauthorized reseller who isn’t working with your company anyway. These gray-market sellers have no relationship with your business, do not expect any ad support, and therefore have no reason to worry about adhering to any rules or guidelines you put in place for your resale channel.
DOES THIS MEAN OUR COMPANY SHOULDN’T USE A MINIMUM ADVERTISED PRICE POLICY? WHAT SHOULD WE DO INSTEAD?
Because a minimum advertised price policy is useful only in such a narrowly defined set of circumstances (where your cooperative ad dollars are at stake), the advice we offer here at TrackStreet — based on our experience helping brands protect themselves from gray-market sellers, and based on our working closely with antitrust experts — is twofold.
First, instead of drafting and publishing your minimum advertised price policy as a standalone statement, that policy should be part of a larger set of reseller pricing guidelines called a unilateral price policy (UPP).
With a properly drafted unilateral price policy, your company can simultaneously set the minimum prices you are willing to allow resellers to publicly advertise your products, and the actual prices you are willing to allow them to resell those products. The other advantage of a UPP is that it allows you to clearly state your consequences for a reseller that fails to acquiesce to your policy’s terms — and these consequences can include more than simply withholding cooperative advertising dollars.
The second part of your strategy for protecting your company from unauthorized resellers will be to implement a comprehensive brand protection strategy to support and enforce your unilateral price policy. Following are several best practices for protecting your brand against gray-market sellers.
BEST PRACTICES FOR SELLER PRICING ENFORCEMENT
- Establish a trust icon to give your authorized resellers — to help consumers distinguish them from the gray-market retailers.
Here’s one effective way to cut down on unauthorized sales of your products — even if those resellers are advertising those products for less than your UPP-approved amounts and underselling your legitimate resale partners.
When consumers start seeing an “Authorized Dealer Verified” trust icon beside your products online — ideally a clickable icon that brings up a real-time message from your company’s site letting the consumer know this retailer is a trusted part of your network — you can create a higher barrier for a gray-market seller to offer your products online. Consumers will begin to look for that trust badge and will be less likely to trust a retail site offering your products without that clickable icon.
- Create an Authorized Dealer Network to restrict (and keep track of) who is able to sell your product.
If you do not have a program in place limiting which sellers are allowed to advertise and resell your products, and to whom they can sell those products, you will have much more difficulty identifying your unauthorized resellers.
Establishing an Authorized Dealer Program turns this situation around in your favor. It allows you to implement quality controls over where your products are advertised and sold. With such a program, you create an agreement with any distributor or wholesaler that states, “You are allowed to sell only to these authorized dealers (or retailers) on our approved list.” You can then create an agreement with your authorized dealers that states, “You are allowed to sell only to end-user customers.” You will also have an opportunity to vet all of these potential resale partners for stability, reputation and track record before allowing them into your network.
Of course, this isn’t a guarantee that you’ll eliminate all clever gray-market sellers who want to get their hands on your products so they can resell them without your approval. No program can make such a guarantee. But an Authorized Dealer Network can help you significantly reduce such problems.
- Deploy an automated solution for online brand protection and enforcement.
Finally, after you’ve built your list of authorized distributors, wholesalers and retailers, and you’ve developed and published your unilateral price policy that lets these resellers know what you expect of them and what the consequences will be for violating your policy, it will be to implement an enforcement system.
Manually monitoring the Internet at all times for all instances of your products being advertised and sold will be too large and expensive an undertaking. It will take up too many of your internal resources — and even if your in-house team is monitoring your resellers around the clock, they still won’t be able to catch every violation of your pricing policy.
This is why we strongly recommend a fully automated Internet platform for reseller monitoring and brand protection — a platform that will monitor your products’ presence across Internet 24/7; compile and organize all data relating to how your products are being advertised; and collect evidence of any violation of your reseller policies, so you can take swift and appropriate enforcement action.
If you would like to discover how such an automated brand protection solution can help your business, let us give you a free demo.