Product manufacturers of enjoy some level of control over retail prices. However, achieving this feat successfully against extremely competitive retail outlets can be especially challenging.
Today, special legal automated tools such as the minimum advertised price (MAP) monitoring, the resale price maintenance (RPM) agreement and the resale price policy have proven to be effective in getting rid of illegal dealers and ensuring fairness in the market.
Minimum Advertised Price
Minimum advertised price (Map) is a legal agreement reached between the manufacturers of a product and a dealer not to advertise below a particular price. Here, a minimum price at which the dealer can trade comfortably without over stepping specific trade mark standards is reached. This implies that if a retailer advertises a product at a discount price- below the Map price, they would be directly violating the Map policy.
As a manufacturer, stern warnings should be sent to all retailers that the consequences of MAP violation will be fully enforced; this might mean a withdrawal of cooperative advertising funds by the company or a total ban of the retailer. A prior warning, however, should be issued to the violator before making a decision. Considering that MAP policies are bound by the law, decisions are left to the court to make.
However, CEO of Intelligence Node, notes that Brands and manufacturers with vast reseller networks find it complex and time-consuming to monitor and enforce minimum advertised price (MAP) pricing policies. Resellers violating MAP pricing policies with deep discounts can harm your brand reputation, sales and profitability. He points out that sites like Amazon mostly alter its prices to match those of unidentified and anonymous retailers who lowered their prices first.
Resale Price Maintenance (RPM) Agreement
This is an agreement between a manufacturer and its distributors to set a particular price or a range of prices at which customers must be charged. This range might be a minimum or a maximum amount. They are also known as the “price floor” (not-sell-less) or price ceiling” (not-sell-more) respectively.
Both limits of the RPM, to some extent, might violate the Federal or State antitrust laws and has been criticized for its lack of consideration of the actual effect of competition.
Resale Price Policy
Also known as the Colgate policy, it is a document that operates on the same principles as the RPM agreement but has no binding rule to the court. This document helps to eliminate the challenges faced by retailers where federal and state antitrust laws are interpreted differently.
In this document, tips and instructions are offered to the suppliers to avoid possibly wrong deals with their resellers.
Benefits of Retail Pricing Policies
There are enormous benefits when these policies and agreements are put in place.
For the manufacturer, it preserves the brands’ trademark and identity, presents a consistent pricing irrespective of the retailers while eradicating illegal ones.
For the retailer, it lets legal sellers to thrive and allows for a proper advertisement and support of the brand.
For the customer, it reduces the stress associated with finding original products. He also benefits better from after sale services.
If your company is yet to get any of these policies due to the funds and time required for follow up, rest assured that its benefits are incomparable when you consider the hassles you are currently dealing with, and the process – not too bogus after all.