5 Common Reasons MAP Programs Fail
Many U.S. brands look first to minimum advertised price (“MAP”) policies in an effort to assert control over their online sales channels and protect brand equity. It is our experience that – with very few exceptions – brands that rely solely on MAP policies and associated monitoring fail to reach their online sales control goals, and their brands continue to erode. Here are five common points of failure:
1. You sell 1P to Amazon and are subject to its pricing algorithm.
Brands that sell 1P to Amazon are subject to Amazon’s dynamic pricing algorithm, which does not follow your stated MAP policy. Amazon’s pricing model is designed to keep prices as low as possible. As such, Amazon pricing is automatically adjusted in the event unauthorized 3P sellers or another retailer advertise below MAP. Given Amazon’s massive visibility, other retailers are likely to take notice and either complain to you or follow it down, which can quickly drag all major sales outlets below MAP. These dynamics can make it challenging for 1P brands to maintain strong MAP compliance levels.
2. You sell through two-step distribution and lack control over downstream resellers.
Brands that sell to distributors that, in turn, sell to retailers can find MAP success elusive. This is because these brands often lack downstream control over their distributors’ customers, including a mechanism for their MAP policies to reach these retailers. In addition, many brands that sell through this model do not have procedures for qualifying or authorizing online sales. Thus, brands are often quickly confronted with numerous downstream resellers listing the brands’ products for sale wherever they want and advertising products below MAP, including on online marketplaces, in an effort to win sales. This puts significant pressure on brands’ direct retailers, which are then forced to break MAP to remain competitive.
3. You have unauthorized online sellers and lack the foundation necessary to stop them.
One of the most common misunderstandings that brands make is believing their MAP policies apply to unauthorized 3P sellers. They do not. MAP policies are ineffective against unauthorized 3P sellers because the brand typically does not know who these sellers are or where they are getting product. The brand has no ability to stop the unauthorized sellers’ supply, and these sellers continue advertising products below MAP, disrupting the brands’ entire business. Brands need to establish a specific legal foundation (having nothing to do with MAP) to stop unauthorized sellers – without which these sellers will continue making MAP success virtually impossible.
4. Your sales teams are undermining your MAP.
In many companies, sales teams may tell customers that they “don’t need to follow the MAP policy” or that the “company will look the other way” if the retailer does not adhere to MAP. In addition to potentially creating legal risk, these types of communications can undermine the success of the entire MAP program. Companies must ensure that all teams are fully aligned on the importance of MAP and that no personnel are knowingly or unknowingly undercutting the company’s efforts.
5. You are unwilling to enforce your MAP policy.
Finally, many companies simply find themselves unwilling to enforce their MAP policy. A MAP policy is only as effective as a company’s willingness to enforce it against any and all violating retailers. Companies must be prepared to stop supplying offending retailers, otherwise the integrity of the entire program will be damaged. If companies are not willing to do this, they are better served to pursue a different strategy altogether to protect and grow their brand equity.
For most companies, having a MAP program alone is an insufficient step to gaining online sales control and preserving long-term brand value. Rather, as we discussed in our recent post, companies must take a holistic approach to controlling online sales. For an in-depth look at a comprehensive MAP strategy, please see our white paper: The Winning Strategy for MAP Success and Long-Term Brand Value in the eCommerce Market. If you wish to discuss how your company’s MAP program can be improved, contact Daren Garcia at dsgarcia@vorys.com or 513.723.4076.