Not every brand knows the importance of keeping their prices high. If you know you make a quality product its brand image would be damaged if it is priced too low. People tend to associate higher priced products as premium products and lower priced as cheap or inferior quality. When there is a saturation of sellers selling in the same Amazon channel, price wars are inevitable.
There are no winners in a price war:
If you have no MAP at all, total mayhem occurs when sellers set their automated reprices to beat the next guy by .01 starting the race to the bottom. For example, shortly after a product is listed with a M.S.R.P. of 49.99 it tanks and being sold for 31.99 a few months later. This will undoubtedly anger many of your long time B&M, website, or Amazon sellers because they cannot reorder since they would need to match the low pricing to compete.
How many times have you had accounts stop ordering suddenly or reach out to you saying that customers are complaining their price is too high because "they can just buy it cheaper on Amazon".
They would most likely be taking a loss once they factor in all their marketing, overhead/warehousing fees. This will cost the brand manufacturer sales because of the unpredictability of the pricing of the item and cause other unexpected cash flow problems since a manufacturer never really knows how much inventory to have on hand. It will also cause retailers from not showing your product off in high traffic areas, or provide outstanding product support due to the fact that the margins are now so low that it wouldn't be worth it. None of this is good for the brand or retailer.
Why MAP obedience is Win -Win:
Here are a few benefits for the brand and for the retailer.
Benefits for the brand:
Brand image is upheld due to stable manufacturer suggested pricing.
Wholesale pricing offered retailers and distributors is more predictable and stable
More predictable orders to better manage cash-flow
B&M accounts are happy and place larger orders because they don't have to compete with online discounts
Can diversify channels by selling to big retailers and small retailers
Price assurance gives retailer freedom to offer a high level of service to products fostering a better brand image.
Benefits for the retailer:
Predictable orders and margins.
Do not need to compete on price.
Foster better relationship with brands since all retailers are on the same page
It's one thing to implement a MAP policy, but it's also another thing to enforce it. Many times, brands have major problems with large volume sellers whose business model is to just sell as many units as possible as fast as possible. This means that they are ok with selling a unit and making 18 cents on it or even making a loss for cashflow purposes.
These kinds of sellers typically don't respect MAP and make life difficult for the brand. The less sellers you have, ideally 1, will give you the best control over MAP and all pricing changes you would like to implement across the channel.
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