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"A MAP policy is a great way to protect those pennies in the basket and to really help your retailers understand that they need to be in compliance if they want to be able to sell your products." — Rae Guimond, director of digital shelf strategy at PriceSpider
With a growing number of channels and retailers, pricing erosion has become a greater challenge for brands as they strive for profitability.
Developing a minimum advertised price (MAP) policy is one way they can prevent price erosion, but it takes a significant alignment between people, processes, and especially, technology to make this happen.
Rae Guimond, director of digital shelf strategy at PriceSpider, an ecommerce platform that offers MAP monitoring tools, says a MAP policy is crucial for brands that want to drive profitability on the digital shelf.
She joined a recent episode of the "Unpacking the Digital Shelf" podcast, "Drawing a MAP Away from Pricing Erosion and Towards Brand Equity," to share why a MAP policy is so necessary for today’s omnichannel ecommerce environment, signs it’s time for your brand to begin developing one, and best practices you can implement to ensure this policy is effective.
A MAP policy allows brands to have more control over what their products will sell for online.
"It’s a pricing strategy that's created by a brand," Guidmond says. "It's really meant to give distributors and sellers that minimum advertised price that they should be listing a product available for."
Maintaining price integrity is one of the main reasons for a brand to create a MAP policy, but it’s important to note that this pricing is different from the manufacturer's suggested retail price (MSRP). Guimond says MSRP is more of a pricing reference point or recommendation brands give to retailers, whereas a MAP policy is a brand’s stated pricing threshold.
"A MAP is really there for a brand to help enforce that price so that it doesn't go below a certain level," she says.
MAP policies also tend to be more prevalent in certain categories than others. Consumer packaged goods (CPG), electronics, and sometimes hardware brands tend to have more advanced MAP policies, Guimond says.
However, PriceSpider has found that automotive brands and companies that sell household utility items are increasingly looking to create MAP policies, especially as they begin to sell online or stand up their own direct-to-consumer (DTC) channels.
"Pre-pandemic, you wouldn't necessarily have seen someone buying oil filters, car parts, or windshield wipers [online]," Guimond says. "A lot of those secondary categories where you didn't see as many ecommerce buyers, now we're experiencing more entrance into that market."
Though inflation has declined from a year ago, it continues to affect consumer shopping behavior.
After nearly three consecutive years of price increases, consumers focus more on value and price than ever before. As a result, many are willing to try private-label brands. At the same time, retailers and brands have pushed inflation-related price hikes almost as far as they can, so they now must employ a different strategy to maintain price integrity, product quality, and brand equity and effectively balance all these considerations without eroding their market share.
"When we tend to see inflation happen, when you tend to see shoppers trying to stretch those budgets, brands often take a look at price erosion and price margins to try to figure out how do we protect it," Guimond says. "But also, how do we keep the quality and integrity of our brand at a level in which a shopper will say, 'Well, I'm going to cut maybe this, but I'm going to go with this branded product because I believe in its quality and its value'?"
A MAP policy can be an effective way to protect brand equity while preventing price erosion.
Depending on its maturity, some brands may be more ready for a MAP policy than others. Guimond says there are four signs your brands may need to begin creating this policy:
Fortunately, Guimond has several tips for how to combat these challenges and create an effective MAP policy that may help you drive greater profitability.
It’s one thing for your brand to develop a MAP policy, but it’s another to build one with expert insights in mind. Here are the five best practices for developing and enforcing a MAP policy.
Once you’ve identified issues with brand equity, pricing, or margin erosion, you’ll need to collaborate with your team to set your MAP across your retail and distribution partners. Guimond says organizations often have to overcome internal fears about loss of sales volume and a negative impact on conversions as they develop their MAP policy, which is why it’s critical to have a dedicated internal resource who can effectively manage and enforce the policy.
"It can be daunting, but a lot of major brands do [a MAP policy], a lot of small brands do it, and a lot of brands that are launching do it, because they really understand that it sets the tone for how retailers should treat the products from that brand." — Rae Guimond, director of digital shelf strategy at PriceSpider
Your organization should enlist the help of an antitrust lawyer as you develop your MAP policy. This can ensure your policy aligns with local, state, national, or international pricing regulations, depending on the jurisdiction.
"It's really important that you don't create it in a vacuum," Guimond says.
Brands also need to define what constitutes a MAP violation, the potential penalties for these infractions, how they will enforce the policy, and what the appeals process will look like.
For example, you could consider enforcing a violation once a retailer goes a certain percentage or dollar amount below their MAP pricing. Consider instituting penalty tiers, depending on the severity of the infraction.
Some potential penalties could include restricting a retailer’s access to new products in your catalog or your brand deciding to pull back its promotional and media spend on a retailer’s marketplace channel, for example.
MAP monitoring software can provide real-time insights on pricing across retailers and channels and streamline policy enforcement, Guimond says.
PriceSpider has software that helps brands enforce their MAP pricing and lessen the amount of time a retailer is out of compliance with the policy, potentially reducing this timeframe to as little as 48 hours.
Monitoring tools also may be effective for addressing issues with third-party (3P) sellers on Amazon and other channels. Brands can use insights and alerts from monitoring software to trigger successive notices to sellers that are out of compliance, though Guimond admits this won’t completely eliminate ongoing problems with 3P sellers. Instead, it may be best for brands to focus on their top 10 to 50 selling partners and ensure they’re in compliance.
"If you know your highest sellers are within MAP compliance, you're doing good and saving those dollars in the basket versus spending time and resources to go after the 3Ps," Guimond says. "That really does seem like whack-a-mole."
Once you create your MAP policy, carefully and clearly communicate it to retailers, channel managers, and other key stakeholders. You also should train and educate everyone across your organization about the policy.
Guimond says it’s important to reiterate the policy on quarterly, weekly, and monthly calls with sellers and retailers and provide a copy of the policy. Some partners may try to negotiate terms when you initially introduce your MAP, but it’s important to hold firm to your stated pricing.
Change, whether internal or external, is never easy. But after three years of upheaval and rapid shifts in consumer buying behavior and the ecommerce landscape, it’s critical for brands to take considered steps to protect their brand equity and pricing online. Developing a MAP policy is one of the most important actions your brand can take to accomplish this.
Enforcing a MAP policy can be tricky, Guimond says, but with a dedicated internal resource, MAP monitoring tools, and a commitment to combating price, margin, and brand equity erosion, brands can maintain their price integrity online and potentially find another effective lever to boost profitability.
"It can be painful in the beginning, but once you have it nailed down and once you have your resources identified for how you're going to enforce it, then it just becomes part of your daily business," Guimond says.
To hear more of Guimond’s tips on creating a MAP policy, listen to the full episode.
