Stop The Low Price Domino Effect with MAP
Enforcing a MAP (Minimum Agreed Price) policy can protect your brand’s image while also encouraging good value-added retailers to stock your product. Failure to do so, on the other hand, can lead to a vicious cycle in which your brand image and product quality are degraded by unchecked price competition between retailers.
Price Erosion Leads to Poor ServiceInternet-savvy consumers can research products and compare prices extremely quickly, and naturally seek out the best possible deal. Predictably enough, retailers respond by lowering prices. Because they can research prices in the same ways as their consumers, this can occur extremely quickly. As they race to cut prices, though, they are likely to cut corners in other areas in order to outcompete their rivals while maintaining an acceptable margin. Customer service is often one of the first things to suffer, with retailers cutting back on nice-to-haves like product expertise and consumer-friendly returns policies. Those retailers that maintain an expert staff can rapidly find themselves being used as showrooms, with customers taking advantage of their expertise before ultimately buying your product from the cheapest possible supplier. Eventually, smaller stores and boutique retailers can no longer compete, leaving big box stores and online virtual retailers as the effective face of your brand. If your customers receive poor service when purchasing your products, it reflects badly on your brand, no matter how unfairly.
Cheap Prices, Cheaper Brand
Unless your business is trying to cater to a budget-priced market, this won’t be the only problem that you face. If you are trying to cultivate a more upmarket image, allowing price wars between your retailers to run unchecked can be fatal. When customers can only access a brand through cut-price retailers, it starts to look like a cut-price brand. In the end, this can even become a self-fulfilling prophecy, as manufacturers are forced to lower production standards to compete with the other low-end brands sold by their budget retailers.
Compete as a Top Brand with MAPEnforcing a MAP policy can prevent retailers from damaging your brand by pricing your products too low. It effectively sets a floor on advertised prices, forcing them to find other ways in which to differentiate themselves: product expertise, excellent customer service, good deals on extended warranties and service packages, and so on. While consumers end up paying more for your products, the added value actually increases customer satisfaction. In fact, many famous brands make use of MAP policies for exactly this reason. If you have ever purchased a GoPro camera, a Samsung smartphone or a tube of Colgate toothpaste from a retailer, you most likely bought it at a price dictated by a MAP policy. While a MAP requires constant enforcement in order to be effective, the potential benefits make it an essential part of your branding strategy.back to blog