Gray Market
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MAP violation and how brands can deal with it

MAP violation and how brands can deal with it

With e-commerce booming more than ever comes the need for brands to align their business partners’ interests in order to stay competitive. One way of doing so is by creating Minimum Advertising Pricing (MAP) policies.

A MAP policy ensures that an item can not be advertised below a minimum price which is set in an agreement between manufacturers, distributors, and retailers. MAP policies intend to benefit both manufacturers and retailers because they assure the retailers’ margin and prevent the devaluation of a brand. 

However,  despite the potential benefits, those set agreements between business partners often get violated by retailers or resellers. In this article, we address the problem of MAP violation by breaking down its consequences and by outlining how brands can tackle the issue. 

What is MAP violation?

MAP violation is when a reseller advertises a product below the appointed price which was set in a MAP policy agreement between a manufacturer and its retailers. In the hard-fought online retail space where numerous sellers are crowding the market, this may happen when resellers want to offer a discount for potential customers. MAP violations accelerate when non-compliant sellers use repricing software that temporarily violates MAP or automatically lower prices when the competition does.    

The problem becomes more visible when looking at a concrete example from the business world. Last year, the shoemaker Birkenstock saw the wholesaler Costco selling Birkenstocks for nearly half the price on its website and for as little as one-third of the normal retail price in some of its stores. 

Why brands should care about MAP violations

Not tracking MAP violations can cause serious problems for brands as outlined below.

Unfair pricing divert customers

Even though the problem is not limited to e-commerce, online shoppers compare prices on multiple buying platforms to find the best deal before making a purchase. This increases the risk that customers drift to unauthorized resellers who offer products below the minimum advertising price. 

Brands end up losing reputation

When consumers see products of a brand at a very low price, that doesn’t necessarily mean that it attracts them. It can rather have the opposite effect. Low prices might not be a good representation of brand value or even a sign of a counterfeit or gray market in the eyes of potential customers. 

Disrupts relationship management with distributors

Not keeping track of MAP violations has potentially negative effects on a brand’s partner network. Brand owners are dependent on their distribution channels and therefore choose retailers carefully. Non-compliant distributors and unauthorized resellers damage trust in business relations which troubles all stakeholders in the distribution chain. 

Brands are losing revenue too

MAP violations also cut into brands (and resellers) margin which leads to revenue losses. Diverted customers, reputation damages and non-compliant distributors are ultimately causing revenue losses too.  

Tips on tackling MAP violations

MAP violation tracking is indispensable when you want to protect your brand from the above-summarized threats. Further on we make clear that enforcing rules go hand in hand with compliance. Additionally, be prepared to deploy resources for monitoring and use technology-based tracking solutions to cope with MAP violations across marketplaces. 

Communicate actively with distributors

Clearly, being in touch with your distribution network is important on all levels. This holds also true for upholding compliance regarding MAP policy agreements. As shown in a research taken out by Harvard business review, it becomes apparent that sending a notice to resellers, where jurisdictions allow, when they are found to violate MAP policies improves compliance. 

Secondly, demonstrate your willingness to act by enforcing rules through penalties. Otherwise, sending notices is not effective and might be perceived as empty threats.  

Dedicate resources to monitor your resellers

Monitoring and tackling MAP violations need to be done systematically. Therefore, brands should assign a team member or better a task force that is responsible for monitoring and enforcing violations across marketplaces

Some companies might not have the workforce to delegate MAP violation tracking in-house. And even if, it might still be unrealistic for brands to constantly track all activity around MAP policy compliance. Brands often work with numerous resellers that on their part are advertising on third-party marketplaces. Not to mention offline retail with special offerings and TV ads. 

Track MAP violations at scale

An alternative solution for this is getting external help from specialized brand protection companies that have the necessary expertise and technology-based solutions.

MAP violations need to be tracked at large scales to be efficient. The best way to do so is by working with advanced technological solutions that can scan large amounts of data across marketplaces and platforms. 

Next step: map violation tracking

Brands eventually need to have a place where they can overview the pricing from all of their distributors. An all-in-one MAP violation tracking solution will help brands save time and enforce their MAP policy as soon as possible.

Red Points Seller Tracking covers the full range of key features to protect your brand from the risks that arise from MAP violations. The software detects non-compliance and notifies sellers automatically. This means market behavior including price changes becomes visible, making it easier for brands to use the data to negotiate future agreements and maximize sales. 

Book your personalized demo with a brand protection expert to see Red Points’ in action with your brand 

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