For better or for worse, the internet has changed the game rules for many businesses. The most noticeable change is the appearance and growth of eCommerce. In a matter of years, online shopping has reached its peak, and both brands and retailers had to rethink their ways of doing business.
Today’s shoppers are constantly checking the product price on various websites in order to find the best deal. Even though there are other important factors as well, price is still one of the decisive ones. Therefore, the race to win customers by offering lower prices is on full blast. Luckily, brands have a few cards in their sleeve to overcome this situation, and Minimum Advertised Price (MAP) being one of the most effective ones.
What is the Minimum Advertised Price?
In short, Minimum Advertised Price (MAP) means that there is a pre-defined price for a product and that resellers can’t advertise or sell it below that price. For instance, if a brand decided that their phone should cost $500, retailers and resellers are obliged to sell it at that price (or above). When you have a lot of products and you’re collaborating with many retailers, it’s almost impossible to keep an eye on all price changes manually. That’s why it is always handy to have help from a price monitoring tool, such as Price2Spy.
Even though MAP policies don’t work as a legal contract, the agreement still gives brands (suppliers) the upper hand. For example, they can decide against supplying the retailer/reseller who violated the MAP policy. By doing so, brands create a more transparent relationship with distributors and retailers.
Benefits of MAP policies
1. Keep the Brand Identity and Reputation
Retail price is one of the most used indicators of a product value and reputation. Even though price doesn’t necessarily need to reflect the quality of the product, the majority of the shoppers perceive it in that way. Therefore, constant price changes are not well looked upon. That creates the feeling that the product doesn’t have some special value (or reputation) if the price can fluctuate that much.
Shoppers tend to resonate like this especially in the case of luxury brands and their products. If, for example, a price for some luxury item starts changing very often, shoppers might think that there is some scam behind it. In most cases, they’ll think that the item is fake. This can seriously affect the brand’s image, so it’s understandable why they pay so much attention to who they are going to collaborate with.
Two years ago, one of the very famous luxury brands, Burberry, burned its own products worth 28.6 million in order to protect the exclusivity status.
2. Build a Good Relationship Among All Involved Parties
As we already said, when MAP policies are followed by all involved parties, their business relationship gets stronger. That creates a more favorable environment for future collaborations. When sellers follow the MAP policy, the brands also tend to inform them about new product releases before anyone else. Of course, they’ll have an advantage when brands are deciding who they are going to distribute their products to.
3. Avoid Price Wars
eCommerce, as well as any other industry for that matter, is full of competition. Wanting to achieve better results than your competitors is always commendable, but some lines aren’t meant to be crossed. Retailers/resellers tend to compete by lowering the prices. This can easily escalate into a serious price war. Once you start a vicious circle of constantly lowering the prices, there’s hardly any way out of it. This usually ends up with brands ending the relationship with the retailer. MAP policy, however, helps create a level playing field between both sides, ensuring that everybody is playing fair.
4. Combat the Unauthorized Sellers
Another common problem that the eCommerce environment faces with its gray market. While the majority of authorized sellers are playing fair and following the MAP, unauthorized sellers are under no such obligation. However, authorized sellers who bleach the MAP agreement, are actually helping sellers on the gray market. If they aren’t following the MAP, it means that they’re selling the products at a cheaper price. By doing so, sellers on the gray market are able to find the same products at a much more affordable price, just to resell it at a higher price afterwards. However, when pricing strategies and policies are consistent, the risk of this kind of event is minimal.
All in all, the only way to thrive in today’s eCommerce industry is to have a consistent pricing policy alongside creating a stable brand reputation. In order to accomplish this goal, protection strategies, such as MAP, are a necessity. Not only your brand will be safer, but your relationship with all parties involved will be more transparent.