A growing number of manufacturers now use MAP policies to protect the integrity of their products. By dictating how low distributors can price an item, it’s possible to prevent excessive undercutting. This is ultimately good for both the manufacturer and retailers.
When retailers start using extreme discounts to gain an edge over the competition, it creates a chain reaction of negative effects.
• Vendors are forced to compete with each other solely on price, which creates an unfair playing field and can drive smaller retailers out of the market.
• The brand’s identity and value suffers, directly harming the manufacturer.
• Inconsistent pricing makes customers unhappy, as they feel obliged to look around extensively for the best deal, rather than just buying wherever it is convenient.
The end result is an unhealthy market and significantly lower profit margins for everyone. This is an especially common problem in online commerce. By implementing a hard minimum price on your products, it’s possible to avoid this.
Yet a MAP policy is only good if retailers actually respect it. MAP policy enforcement isn’t easy; you need to monitor distributor prices, and act quickly once a violation has been detected. But just how should you deal with a vendor that refuses to cooperate?
The Right Way to Handle MAP Violations
It’s important to ensure that your MAP guidelines are clear (and enforced). Some violations are actually due to the vendor misunderstanding the policy. First time offenses can be handled with just a polite notification, then requesting that they adjust the price accordingly.
Repeat offenders, meanwhile, are a little more difficult to deal with. After sending a cease and desist letter, common measures include:
1. A temporary refusal to provide manufacturer support
2. Withdrawal of co-op marketing funds
3. Denying retailer access to specific products
4. Termination of the business relationship.
When disciplining vendors, consistency and firmness are key to prevent complaints from other dealers. It is also a good idea to cooperate with “model” retailers, and request that they report any distributor violations. This not only makes it easier for you to find violations, it also demonstrates your commitment to enforcing the policy.