What does a good pricing policy look like? Unfortunately, many manufacturers simply turn to Google or their competitors’ policies to answer this question, and what they find often creates a new problem, rather than a solution to their pricing issues.
Michael Murphy, an attorney from K&L Gates and our latest guest on the Ecommerce Connected podcast, says, “What they usually end up with is an illegal price-fixing agreement that does very little, if anything, in the marketplace.”
Pricing policies are complex legal documents. And in order to solve your problems with price erosion or remove your unauthorized resellers, your policy needs to be specific to your brand.
In this episode of Ecommerce Connected, our host Anthony Capozzoli sits down with Michael Murphy and draws from his experience with manufacturers around the globe to talk about what makes pricing policies work. Michael explains that there are three pillars of successful pricing policies, and digs into the first one.
Create an authorized dealer program
In conversations about pricing policies, you’ll often hear people talk about an ADP, or authorized dealer program. Developing one is crucial to creating a successful pricing policy, because it allows you to choose which sellers you’ll allow to sell your products and where and how they can sell them. This ensures you only wind up working with sellers who help your brand, and increases the likelihood that your sellers will actually respect your pricing policy.
Michael describes an ADP as a program “where you as a manufacturer are actually getting transparency and control over who’s selling your products and where they’re selling them, especially online. I always say without control, you’re never going to be able to achieve the sustainable and predictable dealer margins in the marketplace that you’re looking for.”
It’s basically just a formal process for vetting potential online sellers and considering how they’ll impact your brand before you start doing business together.
“So for instance, someone can apply and say, ‘Hey, listen, I sell on Amazon. I sell on eBay, I sell on Jet. I sell on my own independent website and I want to sell all your products there.’ And you have a right as a manufacturer to say, ‘OK, let’s look at these marketplaces.’ I don’t know, maybe you don’t want anyone selling your products on eBay so no one’s allowed to sell on eBay. Maybe you’re okay with it. You let them sell on eBay, but maybe you already have five or ten guys on Amazon and you don’t want any more.”
With a little strategic planning, you can create an arrangement that serves both your brand and your retailers better in the long run. But there’s a lot more to it than that. Don’t miss the rest of what Michael has to share on this episode of Ecommerce Connected.
Learn more on our podcast
Anthony Capozzoli lends his ecommerce expertise in our podcast, PriceSpider Ecommerce Connected. This episode features an exclusive interview with Michael Murphy, an attorney from K&L Gates. Michael and Anthony discuss the three pillars of successful pricing policies and focus on why creating an authorized dealer program is so crucial.
Check it out!