- B2B buyers actively research products and advertised prices online before they purchase
- Channel partners often use aggressive price advertising to differentiate themselves, which can negatively impact a brand
- When included in overall channel pricing strategy, minimum advertised pricing policies (MAPP) protect the brand without interfering with resellers’ ability to set actual sale prices
Today, empowered B2B buyers research, source and price many products online. This research brings them in contact with a broad representation of channel partners, including online-only resellers, traditional resellers with an online presence, third-party vendors and auction sites. In this environment, partners often differentiate themselves by using aggressive online-price advertising that does not represent the market position of the product. This behavior can have a negative impact on the supplier’s brand while driving margin erosion and channel conflict. With legal restrictions on price fixing, what can suppliers do to ensure they are protected?
The solution: Institute a minimum advertised price policy (MAPP) in the channel.
A MAPP sets a minimum (or floor) for advertised pricing on defined products and offerings. Resell partners may sell the product at any price but may not advertise it below the defined minimum. Therefore, these policies are a marketing policy for pricing, but they are not price-setting.
If you are considering a MAPP, here are some ways to build an effective policy for your channel program:
- Understand the pricing landscape. Start by reviewing current advertised prices for your key products sold through the channel. Are they at list, manufacturer’s suggested retail price, street price or below street price? A simple online search can be an eye-opening experience. Setting the MAPP threshold should take into consideration other dynamics like brand strength, product lifecycle and customer demand. As with all pricing strategies, a MAPP requires alignment across the sales, channel, marketing and product organizations.
- Communicate the details. Build the policy by defining the MAPP and why you are putting it in place. Apply compliance requirements to the channel overall; do not limit them to a segment of partners (e.g. online-only resell partners). Clearly state that the MAPP is for advertising purposes only and that it is a unilateral policy enacted without agreement from any reseller, thereby reiterating that you are not setting customer pricing. Specify which products are covered by the policy and what the penalties are for noncompliance. These can escalate from losing co-op and market development funds (MDF) to losing access to MAPP products, all the way to losing partner authorization.
- Govern the policy consistently. Enforcement needs to start with clear ownership of the policy and a process to manage compliance. This responsibility usually resides with the channel operations function. While the policy states what the penalties are, the governance process enforces them fairly and consistently across the entire partner ecosystem. Managing policy compliance can range from reviewing co-op or MDF pre-approvals and reimbursements to using online monitoring services for proactive tracking.
MAPP should expressly allow the reseller to control customer prices beyond advertising. Check with your legal counsel to determine local state and country requirements. When done correctly, a MAPP can protect the brand, support higher partner margins and minimize channel distress.
If you would like more information on how to successfully align your channel pricing strategies with your channel management strategy, please contact us or consider joining us at 2016 Summit Europe.