MAP Pricing Policy: 1 Often Overlooked Reason Why It's So Important

By: Andrew Schydlowsky (TrackStreet) September 15, 2017

Without it, You Risk Turning Your Brick-and-Mortar Retailers into “Showrooms” — and That Leads to an Even Greater Risk

A recent Law360 newsletter article about Minimum Advertised Price (MAP) pricing policies discusses three ways a MAP violation can harm the manufacturer whose product a reseller is publicly advertising below the MAP-specified minimum.

Two of the problems mentioned in the article are widely understood and often discussed. First, a violation can shake the confidence in the manufacturer’s honorable retailers who are abiding by the MAP pricing policy. And second, cut-rate advertised prices can erode the brand’s image. In fact, MAP proponents often cite these as primary reasons manufacturers should draft a MAP policy in the first place.

But the article also mentions a third potential danger that a manufacturer faces when its MAP policy is violated, a risk rarely discussed but at least as important for brands to think about as these other risks of either allowing MAP violations to go unchecked or, even worse, not implementing and enforcing a MAP policy at all.

That third danger a manufacturer faces when its MAP pricing policy is violated is that, if the company sells its products through brick-and-mortar stores, those stores can be effectively turned into showrooms. That is, when customers know they can buy a product online for less than in a retail store, those customers can use the retail location simply to see and touch the product, and maybe even waste a salesperson’s time as they educate the customer about it — knowing all along they have no intention of purchasing the item from that store.

 

THE RARELY DISCUSSED RISK OF LOSING BRICK-AND-MORTAR STORES IN YOUR SALES CHANNEL

Obviously, if you are a manufacturer and sell your products through both online and physical stores, your brick-and-mortar retailers need to know you won’t undercut them by allowing online resellers to advertise your products for less than the prices they are obliged to advertise them in their physical locations. That means you need a MAP policy, and you need to thoroughly and aggressively enforce it.

The logic here is straightforward: If your retail partners see your MAP policy violated with impunity by online resellers, advertising your products for less than these storeowners can compete with, then those retail outlets are likely to stop wanting to carry your product line. They’ll know they’re being reduced to free showrooms for your goods, and they’ll determine it isn’t worth the investment or shelf space.

But what might not be so obvious, and is rarely discussed in this context, is what happens next. What fallout does a manufacturer suffer when physical stores stop carrying its products?

The risk is greater than simply a shrinking resale channel — although that is no small matter. But the equally important danger is that when a brand loses its presence in physical retail stores, that brand loses an important touch point with existing customers and a chance to be introduced to new ones.

In today’s highly competitive online retail landscape, with a seemingly never-ending list of new brands emerging to compete with yours, the ability to secure physical shelf or rack space in a brick-and-mortar retail location can be an invaluable asset to your ongoing revenue and your ability to grow your brand.

All of which means that your relationships with brick-and-mortar retail stores are vital — and you cannot afford to put those relationships at risk by not strictly enforcing a minimum advertised price policy that gives those physical stores a level playing field for selling your products.

 

A WELL-ENFORCED MAP PRICING POLICY CAN BE A VALUE PROPOSITION TO NEW BRICK-AND-MORTAR RESELLERS

The flipside is also true: When you publish and actively enforce a MAP policy for all resellers, you remove some of the concern any physical storeowner or chain will understandably have in taking on your product line.

Your strictly enforced MAP policy, in other words, sends a signal to storeowners that you understand their concerns about being undersold by online retailers — and that you will protect them against that risk. And this means that if you deploy the right MAP monitoring and enforcement solution, you can use this as a selling point to new storeowners.

 

DEPLOY THE RIGHT MAP ENFORCEMENT SOLUTION

If you’re interested in deploying a comprehensive MAP monitoring and enforcement solution, contact TrackStreet now.

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