Pricing Violations: It’s David, Not Goliath
While large sellers are often blamed for driving prices low and commoditizing goods and services, the big guys aren’t always to blame when it comes to violations of minimum advertised price (MAP) policies. With regard to MAP, smaller retail sites are often the first ones to lower the price, which triggers larger sites and marketplaces to follow suit. In fact, our data suggests that price violations occur most on weekends, or after 5 p.m. when many sellers believe no one is looking.
Be Comprehensive vs. a Slice
In an increasingly competitive online world, where consumers have more options at their fingertips each day, it’s imperative that brand manufacturers that are working with online resellers are conducting ongoing and comprehensive patrolling and monitoring of their MAP policies. This means brands should monitor the entire web for pricing violations, which can be tricky. When brands are monitoring the entire landscape, only then do they have a completely accurate picture of what's happening with pricing. This challenges historical methods, where brands only looked at a handful of sites they believed were driving the bulk of the revenue. Today, this approach of monitoring “a slice of the web” is resulting in brands missing activity and being unable to successfully enforce MAP.
Who Moved First?
When it comes to pricing violations, large sites oftentimes get a bad name. Contrary to popular belief, large sites and marketplaces scour the web for pricing changes, and then follow suit. Due to their reach, when these large marketplaces react and drop their price below MAP, they're generally accused of moving first, simply because of their significant visibility. The reality is that, in many cases, the smaller, more obscure online sellers are the ones reducing the price first, which then causes a domino effect for others. In addition, the pricing violation from the smaller online seller may also come from an unauthorized seller. Regardless, other sites will still drop their pricing to stay competitive. At the least, brands should keep a log of pricing violations. By compiling detailed notes of the history of all seller violations and your correspondence with them in one place, it’s easier to identify patterns and repeat offenders.
Catch it Early
Visibility into who moved first enables the brand manufacturer to catch violations early, before more resellers follow suit and there's an overwhelming number of violators to chase down. For that reason, it’s critical that brands catch the sites that move first, in near real time. With ongoing monitoring, brand manufacturers increase the likelihood of obtaining proof and timing of the violation, so brands can immediately notify the reseller and they can remedy it before the domino effect happens.
While violations typically happen all the time, the majority of MAP violations happen on weekends or after 5 p.m. Our data shows nearly seven in 10 violations start on nights or weekends (with the majority starting on Saturday). For that reason, brands need to be diligent about monitoring pricing at night as well as on holidays and weekends — when sellers think no one is looking.
Once more resellers recognize they're being regularly monitored, it significantly decreases the likelihood of violators — and if nothing else, it cuts down on the price-cutting game. Enforcing MAP pricing comprehensively is both a commitment to your reseller partners and to the overall protection of your brand.
Pam Springer is the CEO of ORIS Intelligence, a provider of actionable insights that preserve pricing integrity for manufacturers.
