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  • Writer's pictureArt Fletcher

The Role of Minimum Advertised Price Enforcement toward Premiumization and Profitability

Updated: May 30

A Minimum Advertised Price (MAP) policy is a pricing strategy employed by manufacturers to set the lowest price at which retailers can advertise their products. While retailers are free to sell products they have purchased at any price, the MAP policy restricts the advertised price to ensure a level playing field across various sales channels. This policy is particularly valuable to brands as it helps maintain the perceived value and integrity of their products, preventing price wars that can erode brand equity. By enforcing MAP policies, brands can protect their profit margins, support their authorized retailers, and ensure consistent pricing that reflects the brand's quality and market positioning. Additionally, MAP policies can enhance consumer trust by ensuring that they receive fair and consistent pricing regardless of where they shop, thereby contributing to long-term brand loyalty and profitability.

In this article we will explore the importance of profit protection, brand health, the role of a minimum advertised price policy, as well as loopholes consistently impacting product values. These loopholes apply pressure to a manufacturer's authorized distribution channel, robbing them of demand and profitability.

Know how to use your MAP policy as well as Terms and Conditions.
How effective is a Minimum Advertised Price Policy (MAP) by itself?

How pricing strategies drive profitability.

It does not take a mathematician to understand that if you can sell a product for more money, the company will make more money. Rafi Mohammed captured this issue brilliantly in his 2012 article for Harvard Business Review, titled, "Use Pricing Strategy to Boost Sales." In the article, Mohammed references an effort by McKinsey & Co., who studied the "Global 1200 and found that if they raised prices by just 1% — and demand remains constant — profits would go up on average by 11%." It's hard to say if those percentages from 2012 would be accurate today, but what we can say is the marketplace is drastically different than it was in 2012. Marketplace sales channels like Amazon and eBay, by definition have created an enhanced level of complexity for manufacturers to execute their pricing strategies and drive profit.

Minimum Advertised Price Enforcement is just the tip of the Iceberg.

Our friend Gene Zelek, wrote an article for this blog in 2022, outlining the importance of controlling distribution. In the article Zelek highlights the importance of controlling distribution and the pitfalls when discounted products fall into the hands of sellers that aren't beholden to brand sales policies. Over the past six years, our research involving thousands of marketplace sellers and tracing their listings back to the product source has enabled us to establish seller categories. Minimum advertised price enforcement isn't the only thing brands need to do to protect their brand, in fact, it isn't even the most important thing to solve. While MAP violations harm long term brand health, they are usually driven by sales from less sustainable sales channels. The Counter Diversion categorizations of these listings has enabled our clients to enforce the correct sales policy or address internal business practices that are impacting their product values, brand health and profitability.

Enforce your MAP policy as well as Terms & Conditions
Counter Diversion's 3P seller categories

to discuss strategies for safeguarding your product values and brand reputation across online marketplaces.

Benefits and Risks of Distribution Control

The ideal scenario has always been for brands to have a robust system in place to track unauthorized sellers' inventory back to the original source, enabling them to enforce their sales policies as intended. This level of traceability ensures that products are only sold through authorized channels, maintaining the integrity of pricing strategies and brand reputation. With this capability, brands can swiftly identify any breaches in their supply chain, take corrective actions, and hold suppliers accountable for unauthorized distributions. This not only protects the brand's market positioning but also guarantees that consumers receive genuine products with the full benefits of warranties and customer support, thereby enhancing customer trust and loyalty. That capability has long seemed out of reach but does exists today.

For brands that lack control over their distribution, there are significant risks. First, they face revenue loss due to price undercutting by unauthorized sellers, which can erode profit margins. Second, the brand's reputation can be damaged if consumers have negative experiences with products purchased through unauthorized channels, which may lack proper warranties or support. Third, there is a risk of market dilution, where the proliferation of unauthorized sellers can lead to inconsistent customer experiences and decreased perceived value of the brand. Fourth, authorized retailers may lose trust and reduce their support for the brand, feeling undermined by unchecked grey market activities. Finally, without control over distribution, brands may struggle to enforce their Minimum Advertised Price (MAP) policies, leading to a race to the bottom in pricing and a loss of brand prestige. These risks collectively undermine the brand's market position, profitability, and long-term growth.

How to Take Action

Take action and enforce your sales policies
Understand source of product and how to address each situation.

Before you do anything, have a plan on what you want to accomplish. What do you want your online marketplace presence to look like? Not long ago there was an underlying feeling that unauthorized marketplace sales were something that the industry was going to have to live with. Counter Diversion was started by a brand protection manager who wasn't willing to live with that reality and wanted to make the tracked data actionable by following these steps.

Step 1 -

Define what you want your marketplace presence to look like.

Step 2 -

Write or adjust sales policies to enable your brand to achieve the desired marketplace results.

Step 3 -

You need a good tracking company whose data you can trust. Track Street, Potoo, Prism Commerce, UPP Market, MAPP Trap are just a couple.

Step 4 -

Action the data you receive. Ingest the tracking results, investigate the source of product, categorize the sellers, enforce your sales policies. We'd love to help you with this phase, but even if you don't go with us, we'll tell you how we do it during a consultation. Our process has been described as simply to understand, but very difficult to execute.

Step 5 -

Drive higher average sales prices, improve profitability and long-term brand health, improving demand and brand desire. Hit your bonuses, go on lavish vacations.

In Conclusion

In conclusion, gaining a clear understanding of the source of products sold by unauthorized third-party sellers is crucial for brands to enforce their sales policies effectively and address internal business practices. By implementing robust tracking and monitoring systems, brands can maintain control over their distribution channels, ensuring that products are sold through authorized retailers at the intended prices. This vigilance protects the brand's value, enhances consumer trust, and preserves the integrity of the customer experience. Furthermore, identifying and rectifying leaks in the supply chain allows brands to uphold their Minimum Advertised Price (MAP) policies, preventing price erosion and fostering fair competition among authorized sellers. Ultimately, these measures safeguard brand reputation, support profitability, and drive long-term growth, ensuring that the brand remains competitive and trusted in the marketplace.

Counter Diversion is a boutique SaaS company - we don't have marketing and we don't use high-pressure sales tactics. Our goal is to have solid, honest conversations about the issues at hand and then either recommend our service or another one that is a better fit for your needs. If you'd like to engage in that type of discussion, please schedule a free consultation.


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