Reseller Pricing Program: Are You Undermining It with Any of These Mistakes?

By: Andrew Schydlowsky (TrackStreet) October 18, 2018

That reseller pricing program you’ve drafted and are now trying to enforce? Or the one you’re planning to draft and roll out soon? It’s a great step in safeguarding your brand value and your company’s long-term viability. You can’t build a strong brand in the marketplace, after all, if your retail partners are free to advertise your products for discount-bin prices or treat them as loss leaders to lure customers to their stores.

Reseller Pricing Program

 But your pricing policy itself - whether it’s a Minimum Advertised Price (MAP) policy or a Minimum Resale Price (MRP) policy - is only one part of what should be a much more comprehensive brand protection strategy across your company. Protecting your brand, not to mention preserving credibility with your key retail partners, is going to require more than just dashing off a two-page policy and then hoping the document itself does all of the heavy lifting.

With that in mind, it’s worth asking yourself if your company could be undermining your reseller pricing program with any of these common manufacturer mistakes:

 

1. Allowing internal conflicting agendas to weaken your pricing policy

One of the difficult realities manufacturers can face when they first roll out a new pricing policy is that it causes some short-term pain. Internal sales team might lose some of their sales volume initially, because the policy requires them to raise their pricing on every resale partner, or because the program also included the creation of an Authorized Dealer Network and now they can sell only to companies on that pre-approved list.

Rolling out your reseller pricing program should take these potential conflicts into account, so that you can win buy-in for your program - and compliance with it - across your organization right from the beginning. Maybe you can find another way to compensate your sales reps for the short-term commissions or bonuses they might be losing out on while you clean up your sales channel and train your resale partners on the new rules.

Perhaps most important, your rollout plan should include a clear explanation to your organization about why your new, stricter reseller pricing guidelines - even though they might slow sales in the short-term - are in everyone’s best interest, including your resellers themselves, because they will help preserve the long-term health of your business.

 

2. Failing to show resolve about enforcement

Here’s another way manufacturers can totally undermine their own pricing policies, even if those policies are well written and make a compelling case to resellers not to violate their guidelines.

None of that matters, of course, if your retail partner spots another retailer advertising your products for well below the prices stated in your MAP or MRP policy. When one of your reputable resale partners starts seeing their competitors violating your policy out in the open, and getting away with it, that company is likely to have two reactions - both of them negative.

First, the company is likely to think your company doesn’t really take your own pricing policy seriously. So they’re likely to start treating it as a simple “suggestion” about minimum prices, not a hard-and-fast rule. Why wouldn’t they see it this way?

Second, your reputable retailer is likely to think that, if you’re okay with everyone else offering your products for X, why shouldn’t they do it, too? Actually, they probably have no choice, now that all of their competitors are doing it. If they keep your “suggested” minimum prices, they’ll be undersold by a bunch of other retailers.

 

3. Treating the policy itself as a magic bullet

Finally, you can’t just publish your reseller pricing policy and expect everything suddenly to fall into place exactly as you want it - no more pricing violations by your authorized resellers, no more rogue retailers getting their hands on your products, no more major retail partners calling up to ask for exceptions to your pricing rules or other special treatment.

Yes, your pricing policy can have a powerful deterrent effect on your legitimate resale channel, preventing them from engaging in a price war that only hurts them, other retailers who might want to carry your products, and your brand itself.

But you will also need to complement your pricing policy with other brand protection efforts. Some examples include:

 

  • Creating an Authorized Dealer Network (to restrict distribution to pre-vetted businesses and make it easier to track down the sources of violations)
  • Educating your internal teams (sales, customer support, shipping, etc.) on how to handle questions or complaints from resellers about your new pricing policy
  • Consistently monitoring your resale channel, particularly your online retailers, at all times to ensure compliance - and quickly and aggressively dealing with violators

 

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