As ecommerce continues to dominate the retail landscape, brands face the increasing need to protect their value and ensure fair competition through effective pricing policies. One key component in achieving this is the implementation of a Minimum Advertised Price (MAP) policy, which establishes the lowest price at which a product can be advertised. By preventing price undercutting, MAP policies help maintain healthy profit margins for brands. However, implementing such policies can present significant challenges.
In this article, we will explore how brands can initiate and scale a MAP policy specifically designed for ecommerce pricing. We will discuss the signs indicating the necessity of a MAP policy and provide a step-by-step process for developing a brand MAP policy. Additionally, we will delve into essential aspects such as compliance monitoring, enforcement measures, policy review, and the importance of educating your sales team. Furthermore, we will discuss incentives, program scaling, and the continuous need to update and communicate your MAP policy effectively.
Recognizing the Signs: When to Implement a MAP Policy
In order to develop an effective MAP policy, it is crucial to identify the signs that necessitate its implementation. The following indicators suggest that your brand may require a MAP policy:
Price erosion: If you observe a consistent decline in product prices over time, it may indicate that certain retailers or distributors are engaging in price undercutting to gain a competitive advantage.
Brand equity erosion: When your brand is renowned for its quality and premium pricing, but your products are being advertised at lower prices than your desired price point, it can significantly damage your brand equity and perceived value.
Unfair competition: If certain retailers or distributors are advertising your products at significantly lower prices than authorized resellers, it creates an unfair playing field for those adhering to your pricing guidelines.
Margin erosion: Continuous drops in product prices due to a lack of pricing discipline can result in reduced profit margins, thereby harming the growth and sustainability of your business.
Developing a Brand MAP Policy: Crawl, Walk, and Run
The successful implementation of a MAP policy requires careful planning and execution. Follow this step-by-step process to develop a thriving MAP policy:
Crawl:
Establish a clear MAP policy: Lay a solid foundation for your MAP program by determining the minimum advertised price, outlining the consequences of policy violations, and establishing an effective enforcement mechanism.
Collaborate with an experienced antitrust lawyer: Take regional regulations and laws into account to define MAP violations, specify actions in case of violations, establish an appeals process, and consider incorporating promotional MAP (PMAP) timeframes.
Communicate the policy: Ensure effective communication of the policy to your distributors and retailers. Help them understand the policy’s significance and provide a copy of the policy to be signed as an agreement to comply.
Monitor compliance: Regularly monitor distributor and retailer advertisements to ensure policy compliance.
Walk:
Enforce the policy: Take prompt action to enforce the policy when violations occur. This may include issuing warnings, revoking discounts, or even terminating relationships with non-compliant distributors or retailers.
Review and adjust the policy: Regularly review your MAP policy to ensure its continued effectiveness and relevance. Make necessary adjustments to align with market changes and your company’s goals.
Educate your team: Educate your sales team on the importance of the MAP policy and its benefits for the brand. Encourage them to effectively communicate the policy to distributors and retailers while remaining vigilant in its enforcement.
Run:
Provide incentives: Offer incentives to distributors and retailers who comply with the policy. This can include access to exclusive promotions or discounts, priority 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