As more and more sellers turn to online selling, the price competition also becomes widespread. Manufacturers may now be wary to work with an authorized reseller. Brick and mortar stores may also have challenges in procuring items from distributors. This creates a domino effect and fierce competition arises.
As a distributor, how would you ensure that your products are well represented by resellers? How can you prevent price wars from happening?
The answer is to create a solid and streamlined MAP policy. A strong MAP policy not only protects your brand but protects other authorized resellers as well.
What is a MAP Policy?
In a nutshell, a MAP policy is a mutual agreement between manufacturers and distributors or authorized resellers. The MAP policy should be enforced by both the manufacturer and the distributor through “enforceable agreements.” This means that the incentives and repercussions are clearly stated and with reasonable terms.
So, how does the MAP policy work? Manufacturers determine the Manufacturer Suggested Retail Price (MSRP) or Recommended Retail Price (RRP). Thus, a retailer or reseller should not offer less than the recommended price of, say $300, even with a discount. If they offer a 25% discount, the minimum amount should still be at $300. On the other hand, a manufacturer can also determine the price ceiling to prevent over-pricing.
For more information on the MAP policy, check out this infographic.
Guidelines in Creating a MAP Policy
If you’re planning to expand your business and work with authorized resellers here are a few tips on how to create a solid MAP policy:
- Pricing and Advertising — Most online sellers also cover the costs of advertising. When drafting a MAP policy, make sure to include this and allow authorized resellers to be flexible in showing the “Call for Pricing” or “Add to Cart to See Price.” This means that the advertised price or sales price falls on the minimum suggested retail price, but resellers may offer discounts depending on the actions.
- Unilateral Policy — A fair MAP policy should be drafted based on its own decisions without any influences from competitors and should state that it does not constitute an agreement. A manufacturer can also seek the assistance of an antitrust counsel when drafting the policy.
- Clarity and Communication — Be transparent about your MAP policy and introduce it to your authorized resellers. Clearly outline your policy with specific timelines. Also, make sure your tone is friendly yet professional. Make sure you also let them know WHY you are implementing this policy.
- Visibility — Make sure your MAP policy is visible to your authorized resellers. Create a PDF copy and cascade it to your partners. You can also add a link to your website so that authorized resellers and future brand partners can circle back to it.
- Enforcement and Follow Through — This is where most manufacturers or sellers go wrong. Once they send the information, they fail to follow through. This gives the impression that you don’t care about your brand. Chances are, your authorized resellers won’t care, too. Make sure you follow-up with your resellers and give them clear timelines. For example, if one has violated the price recommendation, make sure to follow up in 2 to 3 days because not all changes are reflected instantly.
- Compliance — Send an email communication to violators. However, make sure to use kind words. It could be that they simply forgot to update the prices or are having challenges with the pricing.
Below are sample templates you can use: (Source: https://tradevitality.com/blog/how-to-start-map-monitoring-in-30-days)
First Email Notification
Greetings! This is [introduce yourself] from [Brand]. In an effort to proactively monitor our MAP Policy across the web, we noticed that you are selling one of our products below our policy guidelines.
Product/ Brand: XYZ
Violation Date: January 4, 2021 (see attached screenshot)
Advertised Price vs. MAP Price: $XX vs. $YY
We understand that, more often than not, pricing issues are not intentional. Consider this e-mail a notice that your pricing doesn’t appear to be complying with our MAP Policy. Please refer to the attached for a copy of our MAP Policy.
If this is the first you’re hearing about this, not to worry, please go ahead and update pricing right away for all [Brand] items on your website and any other channels, if applicable. We’ll follow-up if necessary.
Hello [Seller Name],
This email is the final notice to inform you that your pricing doesn’t appear to be in compliance with our MAP Policy.
Given our previous notifications, we’ve reviewed our agreement and have determined that there are grounds for termination for failure to comply with our MAP policy. If [Seller] fails to update pricing across your website and other sales channels within three business days, we will send a Cease and Desist letter.
Below are the details for the product that is in violation of our policy guidelines:
13 January 2016 – Final Notice (see attached screenshot)
7 January 2016 – Second Warning (see attached screenshot)
4 January 2016 – Initial Warning (see attached screenshot)
Advertised Price vs. MAP Price: $XX vs. $YY
Protecting [Brand]’s brand is important to ensure the success of our entire seller network. Our MAP policy is a necessary step to maintain the value and integrity of [Brand]’s image and products for the success of our sellers.
- Deal with Violators — Remove non-compliant sellers from your sales network. If you are trying to uphold integrity in your business this is the first step. It also shows the other resellers that you mean business. Make sure that you are also transparent about these violators. Let them and other sellers know what they violated and what steps you took to address these issues.
Benefits of a MAP Policy
A MAP policy is not only beneficial to manufacturers or distributors, it is also helpful for other resellers. Here’s why:
- It prevents price wars because price drops are prevented. Likewise, you can also control over-pricing.
- Helps avoid loss-leader products for sellers who purposely drop their prices even if they result in losses. Loss-leaders just want to drive traffic to their online stores and capitalize on other higher profit items. This affects your brand value or market positioning.
- Retains competitiveness among suppliers and distributors due to monitored prices. This prevents suppliers from outcompeting the manufacturer.
- Lets you filter poor performers who do not add value to your brand.
- Your products remain attractive to brick-and-mortar stores because the prices are reasonable and they can easily obtain your products.
Growing an online sales business does not mean just manufacturing, selling, and putting price tags. It also means having a strict MAP policy that protects your brand and other authorized resellers. Thus, your products will reach more consumers and be more visible to other buyers.
Having a clear and concise MAP policy would prevent price wars among resellers and makes your brand more competitive and attractive to online sellers and physical stores. A MAP policy provides a win-win solution to both manufacturers and authorized resellers and leads to a positive business relationship and growth.
“The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.“–Henry Hazlitt, American Journalist, business and economics
Great information! Thanks!
Very helpful insights