Manufacturer brands often face a challenge in their reseller relationships. In the ultra-competitive e-commerce environment, retailers tend to cut deep into profit margins to lure shoppers into their store. While deep discounts help them see a boost in sales immediately, they also hurt a brand’s image.
That’s why in many countries like the US, manufacturers can determine a Minimum Advertised Price, which is the limit above which a retailer can price a product. When MAP is violated, manufacturer brands can take legal action.
In the UK, MAP is illegal under the competition law. But even when you can’t set a legally binding minimum price under a jurisdiction, there are quite a few advantages of monitoring your retailers. Because legal action is not the only measure to protect your brand image.
But before diving into that, let’s understand why deep price cuts can hurt your brand.
People associate price with quality
Although there are countless examples of cheap but good quality products, consumers often pay too much attention to the price, perceiving it as a sign of quality. And vice versa, of course.
When your product’s price is too cheap, people who don’t have previous experience with your brand might assume that your brand is inferior to your competitors, or poor quality in general.
Considering how much time it takes to build a powerful brand—and the fact that pricing is a core element of your marketing strategy—there are some things you can do to make your resellers respect your branding strategy.
What to do when retailers price your products too cheap
You can always choose not to work with retailers who hurt your brand. Doing this may cost you sales in the short run, but you can make up for that. What’s harder to fix is the image you’ve built.
What’s less damaging is perhaps talking to your resellers. Learning why they do what they do enables you to may be of help to them. For instance, if their sole purpose is to attract more people, you can build a special campaign together, where you get to limit the duration of their sale, and they get a better deal from you. Adding some extra perks to your deal can help them understand your concerns better and cooperate.
Monitoring your retailers is a must, especially if they’re selling online. Don’t underestimate the recurring price war among retailers, and the fact that it’s affecting your brand too.
Make sure you’re doing everything in your power to detect those sellers who are underpricing your products and prevent them.
This guest blog has been provided by Prisync