Imagine you’re riding around with friends and everyone wants to get ice cream. You’re probably open to everyone’s input about where to get it, but less open to everyone’s suggestions about what flavor you should get. The squad’s hankering for some butterscotch might be off-putting if you’re more of a raspberry cheesecake connoisseur.
In the ecommerce world, pricing policy works in a similar way. While there are some things brands and retailers can (and should) collaborate or negotiate on, it’s best for you to take the lead when it comes to setting prices for your products. That’s where a Unilateral Pricing Policy (UPP) can be useful.
A UPP establishes the lowest price at which a seller or retailer may sell a given product. Being “unilateral,” a UPP is set by the brand or manufacturer without negotiation or agreement from sellers. When a seller fails to abide by the minimum price, a brand can enforce their UPP by issuing a pre-defined penalty or, if necessary, refusing to continue doing business with the offending seller.
In this article, we’ll examine how a UPP can protect your brand, and we’ll clear up some confusion with a few similar and related terms.
How does a unilateral pricing policy protect your brand?
You can’t rely on retailers to match your product pricing out of courtesy. By establishing a Unilateral Pricing Policy, you set a clearly defined minimum price that you can enforce. Here’s why that’s important for your brand.
A UPP protects your brand integrity
Your prices communicate a lot about your products, contributing to consumers’ perception of your brand. You’ve undoubtedly put a lot of thought into your pricing strategy, but it won’t do any good if sellers are able to lower prices indefinitely. Allow the price to dip too low, and shoppers may start to question the quality of your products.
Additionally, you want customers to have a positive experience when purchasing your products, no matter where they prefer to shop. That means you need your resellers to provide excellent customer service. If resellers compete on price, low-quality sellers may secure a larger share of sales than you’d like. But if you enforce your pricing policy, then resellers who want to stand out from the crowd will have to compete by focusing on the customer experience instead.
A UPP prevents price erosion
It can be damaging enough when an individual seller sets their prices too low, but it doesn’t usually stop there. When one seller lowers their price, others tend to follow. And you can’t necessarily blame the later sellers—they just don’t want to get left behind. But this can nonetheless create a “race to the bottom,” where every seller feels they have to undersell the others.
Before you know it, your product could be listed for far less than it’s worth, and your profit margins will wither away. It’s imperative to stop this price erosion from happening before prices start to plummet.
Does UPP differ from MAP?
Historically speaking, a UPP (Unilateral Pricing Policy) and an MAP (Minimum Advertised Price) were sharply distinguished policies. Today, the distinction between the two is blurry at best.
UPP has always referred to a one-way policy determined by the brand and followed by resellers, but MAP used to include the possibility of a two-way agreement negotiated between the brand and resellers. However, this became problematic for brands using a negotiated MAP policy, as such an agreement is liable to price fixing allegations and could violate antitrust law.
The only agreement brands should make with resellers is the authorized reseller agreement, which gives the seller written authorization from the brand to sell their branded goods. Any pricing policy should only be a “rider” on the authorized reseller agreement, stating that the brand unilaterally sets these minimum pricing standards and that they have the right to cease business dealings with any authorized reseller that chooses not to abide by the guidelines of their policy.
Additionally, while MAP refers specifically to the “advertised” price, UPP was originally intended to cover both the advertised price and the resale price—including things like discounts, coupons, incentives, and rebates. But actually enforcing the resale price in court tends to be more hassle than it’s worth for most brands, so this only happens in rare exceptions.
This means that while UPP and MAP may differ on paper, the way they are used in modern practice is nearly identical, and brands often use the terms interchangeably. Most MAP policies today are technically UPPs. And with a few exceptions, most UPPs today are not sharply focused on the distinction between advertised price and resale price.
Does UPP differ from MRP or UMRP?
Other terms you may hear for various pricing policy models include MRP (Minimum Resale/Retail Price) and UMRP (Unilateral Minimum Resale Price).
An MRP is exactly what the name suggests. It’s the lowest price set by the brand for which a reseller may sell a given product. A UMRP differs from an MRP only by specifying the unilateral aspect of the price—being set by the brand without negotiation from resellers. But in practice, any MRP that isn’t unilateral could be viewed as price fixing, so all MRPs should be UMRPs, whether or not they are specified as such.
So, how does an MRP or UMRP differ from a UPP? In practice, they amount to the same thing. The only way we might distinguish them is to say that, strictly speaking, a UPP refers to the policy itself, whereas an MRP or UMRP refers to the price set by the policy.
Does UPP differ from MSRP?
An MSRP (Manufacturer’s Suggested Retail Price) is something else entirely. As the name indicates, this price is merely a suggestion. It isn’t a policy, and it isn’t enforceable. The manufacturer or brand sets this price, but whether or not sellers follow that price suggestion is left up to them. Think of it as more of a baseline. It helps consumers and sellers alike understand what a product is worth.
Furthermore, the MSRP is the suggested high end for the price range, whereas UPP, MAP, MRP, and UMRP all deal with the low end for the price. It usually takes unusual circumstances (like widespread stock outages) for consumers to be willing to pay a higher price than a product’s MSRP. It isn’t uncommon for brands to set an MSRP in addition to establishing a UPP. In this way, you can suggest a default price for sellers to start at, while also putting a firm boundary on how low they can take it.
Enforcing your UPP
The bottom line is this: Whatever terms you use to refer to your pricing policy, you need to have one in place. And crucially, you need to be able to enforce it.
Enforcing a Unilateral Pricing Policy involves tracking prices across all of your resellers. It also includes notifying sellers who allow their prices to dip too low, spelling out the consequences (refusal to continue doing business) if they fail to correct their prices.
This requires a lot of resources that could be better used elsewhere.
That’s where PriceSpider’s Prowl solution comes in. We automatically monitor your products across thousands of retailers and more than 20 marketplaces, ensuring your prices remain consistent wherever they appear. And we offer a streamlined enforcement process to help you address pricing policy violations.
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