We talk a lot about pricing at PriceSpider. But of course, that’s probably no surprise—it’s literally in our name. And it’s also an increasingly relevant topic for brands.
As ecommerce continues to dominate the retail landscape, it’s becoming more important for brands to protect their value and ensure fair competition through pricing policies.
A key component of this is the Minimum Advertised Price (MAP), which establishes the lowest price at which a product can be advertised. MAP policies help prevent price undercutting and maintain healthy profit margins for brands, but implementing them can be a challenging process.
In this article, we’ll explore how brands can start and scale a MAP policy for ecommerce pricing.
Signs that it’s time for a MAP policy
Before developing a MAP policy, it’s important to understand when it’s necessary. Here are some signs that your brand may need a MAP policy:
- Price erosion: If you notice that your product prices are decreasing over time, it could be a sign that some retailers or distributors are engaged in price undercutting to gain a competitive advantage.
- Brand equity erosion: If your brand is known for quality and premium pricing, but your products are being advertised at lower prices than your desired price point, it can damage your brand equity and perceived value.
- Unfair competition: If some retailers or distributors are advertising your products at prices that are significantly lower than other authorized resellers, it can create an unfair playing field for those who are complying with your pricing guidelines.
- Margin erosion: If the prices of your products are continuously dropping due to lack of pricing discipline, it can result in a reduction of profit margins, which can harm the growth and sustainability of your business.
How to develop a brand MAP policy: Crawl, Walk, and Run
Implementing a MAP policy requires careful planning and execution. Below is a step-by-step process to help you develop a successful MAP policy:
- Establish a clear MAP policy: A clear policy is essential to set the foundation for your MAP program. Determine what your minimum advertised price is, what the consequences of violating the policy are, and how you will enforce the policy.
- Collaborate with an antitrust lawyer: Consider regional regulations and laws and define what constitutes a MAP violation, what happens when a violation occurs, how the appeals process will work, and whether you will have promotional MAP (PMAP) timeframes.
- Communicate the policy: Communicate the policy to your distributors and retailers. Make sure they understand the policy and why it is important to the brand. Provide them with a copy of the policy and have them sign an agreement to comply with the policy.
- Monitor compliance: Regularly monitor your distributor and retailer advertisements to ensure they comply with the policy. You can use various monitoring tools such as PriceSpider’s Prowl to make this simple and easy.
- Enforce the policy: If you find a violation, take action to enforce the policy. This can include issuing warnings, revoking discounts, and even terminating your relationship with the distributor or retailer.
- Review and adjust the policy: Regularly review your MAP policy to ensure it is still effective and relevant. Adjust the policy as needed to reflect changes in the market or your company’s goals.
- Educate your team: Educate your sales team on the importance of the MAP policy and how it can benefit the brand. Encourage them to communicate the policy to distributors and retailers and be vigilant about enforcing it.
- Provide incentives: Provide incentives to distributors and retailers who comply with the policy. This can include access to exclusive promotions or discounts, priority in allocation of limited edition or high-demand products, or even co-marketing opportunities.
- Scale the program: As your MAP program becomes more successful, consider expanding it to other product lines or regions. Be sure to maintain consistency in your policy and enforcement across all channels.
- Continue to educate your team: The digital shelf is not “set it and forget it,” and MAP is the same. Be sure to review and update your MAP as needed, communicating out changes to retailers and your teams accordingly. As sellers learn that you’re taking your pricing seriously, your prices will become less volatile, your margins will be more sustainable, and your customers will have better experiences with your brand (they will buy from the best sellers, not the cheapest sellers).
Proactively Protect Your Prices
Remember, a MAP policy is not a pricing agreement because it’s unilateral—you (the brand) set the lowest price your products can be advertised for without the need for your sellers to “agree” to that price. By using a MAP policy, you are simply informing sellers and distributors that if they violate your price, they will receive penalties and may lose the ability to carry your products.
If you notice any signs of price erosion, brand equity erosion, unfair competition, or margin erosion, it may be time to consider implementing a MAP policy. Develop a clear MAP policy, communicate it to your distributors and retailers, monitor compliance, enforce the policy, and educate your team. With these steps in place, you can protect your brand’s value, ensure fair competition, and maintain healthy profit margins.
Want to learn more about how you can do all of the above with the help of a single platform? Talk with an expert about Prowl today.