With more than 20 years’ experience working with and for companies in the consumer electronics industry, I have seen first-hand the challenges e-commerce presents when it comes to how and where products are distributed.
While CE was one of the first industries to adopt minimum advertised price (MAP), many misconceptions around MAP remain. And at the core, a MAP policy is useless unless the manufacturer is diligent and consistent with enforcement.
E-commerce is often treated as a separate sales channel, but it influences sales in all channels. And if not managed properly, e-commerce can cannibalize those sales channels.
E-commerce sales are still less than 10 percent of all U.S. retail sales, but most customers research online before they make a purchase in-store. To survive long-term, CE manufacturers must have a strategy that protects their brand equity, with consistent pricing and messaging throughout all sales channels. MAP is a key part of maintaining that brand equity, including establishing an authorized dealer network and only allowing sales through those authorized dealers.
The good news is that there are simple steps every manufacturer can take to help protect their brand and more effectively enforce pricing policies:
Make it legal. Work with an experienced anti-trust attorney to establish a dealer agreement and a MAP policy. While dealer agreements and MAP policies can be standardized, they are rarely one size fits all.
Less is more. The majority of online advertising is auction-based, so the more dealers a manufacturer has, the more expensive it costs to advertise, leaving less margin for retailers to invest in the customer experience.
Be a policy pusher. Once a dealer agreement and MAP policy are in place, it is important to use software to keep your retailers honest and identify any trouble-makers. It is impossible to effectively and frequently monitor the web manually for retailers playing games. Many violators lower the price at night or on weekends when they know they are less likely to get caught. Software that comprehensively monitors the entire Internet (not just Amazon and Google Shopping) and checks pricing multiple times a day is key to identify who lowered the price first. It also means monitoring big marketplaces as well as smaller, independent websites. Amazon is often blamed for starting price wars, but in reality, it is monitoring other websites and often is the first to match another site.
Remain dedicated. Since business is about relationships, manufacturers need to have a dedicated person or team to contact resellers that are in violation and investigate any unauthorized dealers. There are usually the highest numbers of MAP violations when starting a new MAP policy. It is very important, especially in the beginning, to prioritize the time to contact these violators and unauthorized dealers. Sending warnings and putting temporary holds on offenders sends a strong message that good resellers will respect. Resellers are sometimes like kids; they will keep pushing the limits until they are given a “time-out.” Software should help streamline the whole process of identifying, contacting and tracking troublesome retailers.
Related: How To Strengthen MAP Compliance
Have clear consequences. Send a clear message by cutting off and stopping distribution to the biggest offenders, which will deter violators while allowing credible partners to be more competitive. If there is a level playing field, authorized sellers will be more likely to stock your product, and thus sell more.
Once price is taken out of the equation, it causes everyone to start thinking more about the customer experience. The manufacturer can focus more on the differentiating aspects of its product, and the retailer can focus more on training its staff, so customers get the best product that fits their needs. That enables the customer to have a pleasant experience learning, buying and using the product.
In the end, it’s about leveraging the online channel to help and not hinder the overall bottom line for CE manufacturers.
Justin Meats is chief product officer at ORIS Intelligence, a provider of actionable insights that preserve pricing integrity for manufacturers.