Pricing Policy: Part Two – Monitoring and Enforcement
In the second part of a three-part series of PriceSpider’s podcast, E-Commerce Connected, our global sales executive Anthony Capozzoli discusses pricing policy with Eugene ‘Gene’ Zelek of Taft Law. Gene is a member of the Professional Pricing Society (PPS) and specializes in antitrust and commercial litigation. He provides clients top-level legal counsel in many areas of marketing law including pricing and distribution, intellectual property, supply relationships and new product development.
Monitoring and Enforcing Pricing Policy
There are many moving parts when it comes to monitoring and enforcing pricing policy. Manufacturers may find that simply having enough staff to monitor pricing can be a time-consuming challenge. Gene recommends starting with larger retailers, such as Amazon, Nordstrom and Walmart, then narrowing down after gathering information and base-level insights. Establish first impressions from there, and then start investigations into the smaller players. You must still include all retailers in your monitoring efforts in order to maintain credibility and garner all necessary information to inform future decisions. Beginning with the major players can streamline the efficiency of your research, and a third-party price monitoring system will help offload the manual efforts of monitoring prices.
Once insights are gathered, if any sellers are operating outside the pricing policy, you’ll want to contact them and ask them to rectify any issues. Manufacturers might want to have their sales people responsible for pricing enforcement, whereas Gene suggests delegating this activity to another team member that specializes in pricing policy. Salespeople are there to close deals; they have developed a special relationship with distributors. In order to keep their relationship positive with the opportunity to sell more, it’s more effective to have someone outside of the sales relationship make policy compliance requests.
Manufacturers should not ask their wholesalers to enforce pricing policy. It would be reasonable to ask the wholesalers to pass on information with purchases or to even follow a “Sell” or “Do-Not-Sell” list, but they should not be monitoring and enforcing pricing policy on behalf of the manufacturer. An approved “Sell” list would only include those retailers that could purchase the product. If you have too many distributors to monitor, consider telling a wholesaler that everyone is approved until they violate your policy or you determine they are not a good fit for your product, at which point consider adding these specific retailers to a “Do-Not-Sell” list and ask wholesalers not to provide product to those specific outlets.
Why A Policy
Having a pricing policy — as opposed to a pricing agreement — is the strongest strategy, in Gene’s opinion. Pricing policy is not a negotiation, but rather an announcement of what needs to happen from retailers distributing your product. An agreement allows for each individual retailer to have their own special circumstances — which is incredibly cumbersome — and some agreement terms could actually open the manufacturer up for a lawsuit. Minimum resale price agreements are illegal in five states. If manufacturers want to make a change, they can adjust as they please. Changes shouldn’t be made on a weekly or monthly basis, but if something needs to change even several times in any given year, a new pricing policy notice can be sent.
It’s important to understand this is a long-term play — it levels the playing field to allow higher-margin retailers to stay in the game.
Work to be Done
Gene advises that manufacturers should have a realistic expectation of what the pricing policy will accomplish. Monitoring and enforcement are still necessary, and it also forces manufacturers to look at their distribution channels — even if they have 200 and only need 50. This is an opportunity to investigate wholesalers and distributors, determine if there is overlap and simplify where possible. Starting or reviewing your pricing policy, as well as investigating current pricing and monitoring activity, can provide actionable insights and help manufacturers keep an eye on distributors and revenue.
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