Are you enforcing a reseller pricing policy? If you’re not careful, you might create a conflict for your own sales team. Here’s what to do about it.
Imagine that Apple’s AirPods had a couple of disappointing sales months in a row. Do you think the company would tell its retail partners to start slashing their advertised prices? What if another brand — say, Chanel or Dolce & Gabbana — experienced a lower-than-expected sales quarter or two? Would they offer massive discounts to boost sales volume?
Of course not. Companies like these care much more about their brand — that is, their reputation in the marketplace as makers of premium-quality products — than about hitting a short-term sales number. And these companies know that by deeply discounting their products’ prices to lure customers, they’ll be harming their brand value in the long run.
Which brings us to you and your brand.
If you have a reseller pricing policy in place to protect how your products are advertised and sold (first of all, bravo!), enforcing a pricing policy is a smart strategy to safeguard and improve the long-term health of your brand. In fact, if you sell through a resale channel, failure to implement a Minimum Advertised Price (MAP) or Minimum Resale Price (MRP) policy can jeopardize your most important retail partnerships, your bottom line, and your company’s brand value.
But if you are enforcing a reseller pricing policy, you need to be aware that retailers aren’t the only parties who might be violating it. Your own internal sales teams — including your reps who sell to distributors, wholesalers, and retailers, as well as your eCommerce team that sells directly to consumers — might be tempted to ignore your policy’s minimums so they can hit their sales numbers.
Here are some smart steps to take to keep your internal sales teams from undermining your reseller pricing policy.
Find the source of the problem
If you’re finding your products advertised for prices below your MAP policy allows, you’ll want to trace the problem back to its source. Does your company have a relationship with the retailer violating your MAP-price minimums? If so, can you determine how they got their hands on that inventory — and if they were able to purchase it for below you allow your sales reps to sell to retail partners?
If you don’t have an official relationship with the retailer advertising your products — or you don’t even recognize the company’s name — then how did they get their hands on that inventory? You might trace their purchase back to your own internal sales team and discover someone on your staff sold product to them at well below acceptable prices because they needed to hit their sales quota.
Implement a reseller policy (or start enforcing the one you have)
Let’s say you discover the reason several of your retail partners are asking — even begging — your internal sales reps for product at lower-than-normal prices is that they’re finding rogue resellers advertising your items online for prices way below your MAP-approved levels.
Maybe some of the companies asking you for discounts are even your all-important bricks-and-mortar retailers, whose overheads, like in-store displays and sales training, are making it impossible for them to compete with these online resellers who are violating your MAP.
Now you’ve identified the source of the problem is not your sales reps just being careless with your pricing policy but a much broader problem of retailers unfairly undercutting each other, risking a price war for your products — and damaging your brand in the marketplace.
If this is the case, although it will still be mission-critical to instruct your sales reps they can’t sell to retailers below your allowed prices, your priority here will be to implement a MAP or MRP policy (or start actively and consistently enforcing the one you’ve already published).
Implement an authorized dealer program
One effective way to limit these internal violations of your MAP or MRP policy is to limit the number of distributors, wholesalers, and retailers your in-house sales force is allowed to sell to in the first place.
If you implement an Authorized Dealer Program, in which you screen resellers interested in selling your products and only allow those you want to work with into your network, you narrow the universe of third parties advertising and selling your brand. Under such a policy, you can state that wholesalers are allowed to sell only to a specific list of approved retail partners and that those retailers may sell only to end-user customers. Internally, you can then demand that your sales teams may sell only to these companies who are in good standing with your Authorized Dealer Program.
What’s great about such a program is that, because all of these dealers will have something to lose if they violate your pricing policy, fewer of them will even try. This tracks with a Northwestern University study on MAP violations that found:
“Unauthorized retailers are significantly more likely to violate MAP than are authorized ones.”
Train your team on the value of your pricing policy
Finally, because your program will be most effective if everyone across the company understands why you’re implementing it, you’ll want to explain to your sales teams that there is a good reason for limiting their ability to sell inventory to wholesalers or retailers below specified price points.
You can explain to them: Yes, allowing a retail partner to buy inventory at a discounted rate we don’t offer to other resellers might help you hit your short-term sales numbers. But those sales will soon do far more harm than good; when our other retailers call demanding similar discounting, when a price war over our products begins, when long-standing and lucrative retail partners stop carrying our lines, and when the health of our brand faces a steep fall in the marketplace.
Author: Andrew Schydlowsky is founder and CEO of the internet brand protection platform TrackStreet, which monitors the web for brands and manufacturers to ensure their MAP and other policies are being adhered to, and automatically responds to violations. A serial entrepreneur, Andrew is also founder of Sticky, the leading online tool for adding customer-driven conversations to video and web pages, and he founded and ran the health and wellness e-tailer Performance Unlimited. The Pacific Business Times has recognized Andrew with a 40 Under 40 Award.