Minimum advertised pricing policies are a big deal for small businesses. They sell goods and services through resellers both off and online. Specifically, if you run a retail or online business, these policies help by protecting brand reputation, preserving the price margins designated for authorized sellers and bumping revenue growth for everyone involved.
The idea is gaining momentum. The Wall Street Journal reported last August brands were pushing back against large online retailers by adopting these minimum advertised price policies.
4 Benefits of Minimum Advertised Price Agreements
Pam Springer, CEO and President of ORIS Intelligence, spoke with Small Business Trends about minimum advertised price policies and what smaller companies need to know.
Keep an Eye on Online and In-Store Channels
She started by highlighting how minimum advertised price allows small businesses to keep an eye on the online and in-store channels and resellers they use so different prices aren’t being set.
“Small businesses have limited resources and now have the ability to have their online channels monitored for price parity,” she says, explaining how everyone benefits from the approach. “The ability to have confidence that these channels aren’t cannibalizing each other proves valuable to both manufacturer and retailer — retailers become free to focus on service rather than worrying about showrooming; the brand gets to know all of their sellers, as well as gain the ability to produce and have confidence in revenue forecasts.”
Showrooming is the practice of visiting a brick and mortar store and then shopping for a cheaper price online. It often costs physical stores in sales.
MAP Enforced Products
Minimum advertised price agreements are generally pretty simple. They stop online retailers from displaying prices below the one set by the minimum advertised price agreement. If your small business is reselling such products, you can drum up business using techniques like coupon codes and free shipping as long as you don’t break any agreements or tinker with prices.
Springer says these policies even help companies using big online players to sell their wares.
“Specifically, the businesses that have retailers that sell online for them whether it be on a proprietary website or a marketplace like Amazon or auction site like eBay are the businesses that benefit,” she explains.
There are other distinct advantages. Consumers don’t need to compare prices. A quick search tells them prices are identical. Minimum advertised price polices also eliminate what are called “free riders,” or retailers who sell the product but don’t supply customer service.
“When they have to advertise for the same price as everyone else, it’s in their best interest to either begin offering customer support or stop selling the brand’s product,” Springer says.
Levels the Playing Field
Perhaps best of all, minimum advertised price policies level the playing field for small businesses battling with big-box retailers based on price. Springer points out how consumers can choose to buy online if the speed of ordering and delivery are the most important aspects. They can pick a brick-and-mortar store for the best in high-quality customer service, training and support if they have questions or problems after buying the product.
MAP limits negative buying experiences,” Springer says. “Because the price playing field has been leveled, consumers have a full range of choices as to where to purchase a product.”
Finally, Springer says minimum advertised price policies will become even more important as commerce shifts to cyberspace. She says as consumers get more and more tools to compare products, retailers will need help flushing out unauthorized sellers so competition is based on factors other than price.
“Brands enforcing MAP are laying a strategic foundation for sustainable online and brick and mortar retailing by taking price out of the equation (price parity) and letting their sellers compete on value,” she says.