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Preparing a retail pricing strategy can feel like navigating a minefield. Beneath the tense, competitive surface lie the real threats to your success: unchecked resellers. They offer similar products at below-list prices, thereby sabotaging your brand’s value and reputation. It’s a dark game they play. But luckily, you have a trick up your sleeve: MAP pricing.
A minimum advertised price (MAP) policy is an agreement between suppliers and retailers on the lowest rate that they can promote certain items. If sellers are found to be dipping below this agreed-upon threshold, they can be penalized accordingly. And as for those unmonitored resellers, this is a means of keeping their nefarious activity in check.
If you can successfully implement a MAP pricing policy and curb those violations, the benefits you stand to gain are tremendous. From competitive advantage to product margins to customer relationships, here’s why you need to take MAP seriously:
MAP Pricing Oversees Industry Trends and Prevents Counterfeit Activity
For starters, an effective MAP pricing strategy is vital for surveilling your competitors’ activities. As the old adage goes: Keep your friends close and your enemies closer. In this context, this means doing your due diligence with respect to tracking prices market-wide and subsequently making more informed decisions within the context of your industry.
Of course, the real purpose of monitoring is ensuring that none of your competitors violates MAP pricing agreements. This is because, if they get away with it, your entire industry runs the risk of a dangerous race to the bottom.
Just imagine a world without MAP pricing: Your competitor lists item X at a lower price than you do. So how do you respond? By stooping lower to beat their already-cheap price. In turn, they may reciprocate with yet a lower price, engaging you in a price war that ends in disaster for all involved.
What you end up with here is a short-sighted pricing strategy guaranteed to cripple your market position over time. Sure, it may win you the favor of some quick customers delighted to strike on unbeatable deals. But how are you ever going to hit your profit targets with this approach? You simply can’t. But neither can your rivals.
Price wars are lose-lose scenarios. On the other hand, MAP pricing establishes a playing field where win-wins are possible.
Protect the Value of Your Products
Part of the issue with price battles is that they directly harm the integrity of your goods. With MAP pricing, you won’t be tempted to undervalue items just to keep up with the competition. Instead, you can optimize their worth and protect your profits.
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Similarly, MAP pricing keeps your products from being undermined by third-party sellers. By prohibiting them from setting unreasonably low prices, your products maintain their value and your sales enjoy relative stability.
This brings up another side-effect. MAP pricing enforcement enables smarter stocking procedures. If some unhinged seller comes along selling your items at dirt-cheap prices, that may disrupt your flow of demand. In turn, it will also affect your patterns of supply. Avoiding such market chaos equates to more sustainable inventory turns in the long haul.
By avoiding tumult in the supply chain, you also stand to improve your relationships with every entity involved. At its core, MAP pricing can prove beneficial to manufacturers, retailers, and resellers alike.
Strengthen Your Customer Relationships
Strong MAP policies erase the desire to haphazardly flip flop prices. Instead, you can adopt a policy that cements your brand identity and price image. This image dictates what your goods should be valued at, and it’s a direct reflection of your company’s reputation.
Consider a brand like Whole Foods. They can sell groceries at higher-than-average prices because customers perceive their goods to be worth such elevated prices. If, however, they were inclined to wage a price war against a discount grocer like LIDL, Whole Foods’ prestigious reputation would be quite difficult to recover.
With MAP pricing, you can confidently keep prices—and your brand identity—more stable. And believe it or not, your customers will thank you for it.
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After all, inconsistency in pricing makes you look inconsistent overall. Consider, for instance, a recent Intelligence Node study on an upstart Korean beauty brand that lost its market momentum despite an initial wave of praise. It turns out that they failed to thwart an influx of inauthentic retailers who listed their goods at various prices. Such fluctuations then generated heaps of negative reviews.
Why did they receive these negative reviews? It was because buyers want to know what they’re getting into when they consider shopping for your products. It’s the trust factor inherent to all market transactions. Had that beauty company effectively enforced MAP pricing, they could have demonstrated stability and cultivated that trust. In essence, staying true to brand value is a necessity for genuine customer satisfaction.
Final Word: MAP Pricing Requires Enforcement
By now the importance of MAP pricing is quite evident, but realizing this means nothing if you don’t aggressively find the violators and hold them accountable. Setting the law is only half the battle. You need to enforce it as well.
That’s where price monitoring software comes into play. At Intelligence Node, we‘re proud to offer an industry-leading MAP compliance solution. This will give your brand the safety blanket it deserves. Check out the details and drop us a line if you have any questions about how it can help your business grow to new heights.
About the Author
Lokesh Aryan is a Marketing Analyst at Intelligence Node. Intelligence Node is a real-time retail price intelligence platform that empowers retailers and brands to grow profitability and margins using AI and ML data-driven competitive insights. Lokesh helps entrepreneurs, small business owners, and executives at large companies to establish a strong online search presence. While he is not working, he likes traveling solo, landscape photography, cooking, and playing guitar. You can follow him on Twitter @lav_aryan1095.