Today, consumers can easily find the best price on products with just a few taps on their phone. This has led to unprecedented cost-cutting by retailers, as competition between stores continues to rise. Nonetheless, manufacturers and retailers alike are not happy with this situation.
Many brands now enforce a Minimum Advertised Price policy. By setting a minimum price, the manufacturer can protect both the image of their products and the margins of their dealers. As it takes away a vendor’s ability to compete solely on price, a MAP policy also incentivizes better customer service.
It’s a good outcome for everyone, but there are cases when implementing a MAP policy may backfire. The manufacturers might end up mired in legal trouble, and their relationships with dealers might turn sour. How do you make sure that this doesn’t happen?
PriceManager provides the following pointers:
1. Work with counsel – The first thing that a manufacturer should do is to consult antitrust counsel when drafting the policy. Some clauses may end up being illegal restraints of trade under state law. Lawsuits will cost your business greatly, so you have to minimize exposure as much as possible.
2. Tailor the policy – Every MAP policy should be made with the business’ unique circumstances in mind. Many templates are available online, but these will almost certainly not fit your needs. You need to consider the business implications of every part of the contract.
3. Enforce consistently – One of the worst things you can do is to be inconsistent when enforcing your MAP policy. This is what often damages the trust that dealers have in you, and puts you at risk of antitrust litigation. Make sure that your policy is reasonable enough for dealers to follow, and consider which retailers you cannot afford to lose.
4. Do not negotiate – When you have an ironclad and well-enforced MAP policy, there’s no reason to compromise with non-compliant vendors. You should be willing to terminate business relationships after continuous violation of the policy to avoid giving other retailers the impression that the MAP is flexible. This will save you much trouble down the line.
A good MAP policy can do wonders for your brand, but be careful when designing and implementing it. Like many other things in business, poorly thought out policies will do more harm than good.