The proven pattern to maintaining a successful Minimum Advertised Pricing (“MAP”) program is controlling online sales.
When you have multiple online sellers, there’s a huge incentive to break MAP and drop prices. Many of these sellers are selling anonymously, so imposing MAP restrictions or cutting off supply is nearly impossible.
Because online marketplaces such as Amazon and eBay dynamically track prices and auto-match accordingly, a single seller can wreak havoc on your MAP policy and cause tremendous friction among your brick and mortar retailers as a downward spiral of price dropping and matching ensues.
The pattern for preventing CRaP products or “Can't Realize a Profit” products begins with protecting your price online.
Amazon scopes out product deals on every other eCommerce site and lowers their price so they always have the best deal. So if an online reseller is violating MAP, it gives Amazon free reign to do the same and you lose out on potential profit.
Within a couple weeks of this happening your product inevitably CRaPs out.
When online resellers undercut MAP pricing and substantially lower their prices, other resellers of the same brand, tend to follow suit.
This usually leads to a domino effect of multiple resellers and marketplaces lowering prices until it no longer reflects anything close to MAP. Additionally, to cope with diminished margins, many resellers, online and brick and mortar, look to the manufacturer for additional subsidies to help maintain margins.
The majority of shoppers use a mobile phone inside of a physical store to either look up product reviews, compare prices or find alternative store locations.
Unlike brick-and-mortar customers, online resellers make no investment in the brand in the form of trained sales staffs, product displays, marketing efforts, etc. Moreover, these sellers violate MAP habitually.
Channel conflict ensues with brick-and-mortar customers complaining that they compete against online retailer and demand increasing concessions from the company. This causes a material negative impact to brick-and-mortar sales and continues to erode brand equity.