Dealing with manufacturers' Minimum Advertised Price (MAP) policies?

the rules aren't always clear

[dickbaker]

I had a manufacturer contact me last month about their newly-adopted minimum advertised price (MAP) policy. My prices were too low.

I saw other retailers of their product use a "mouse over HERE to see our unadvertised price" method. I did that on my site, and the sales manager said it was fine.

He then emailed today and said they decided that mouse-overs were not fine, and said I have to do something more, such as require customers to email for the price. That seems like a hassle that will cut down sales. Raising prices on this product will also reduce sales, as pricing is very cutthroat.

Has anyone here come up with an elegant solution to this problem?

I'd love to tell the company to shove it, but I sell a lot of their products.

[arieng]

If you are forced to advertise the higher price, and everybody else, too - why not simple charge the higher price?

In short, because Amazon doesn't. The top tier of online retailers, Amazon's not the only one, don't seem to have any respect for MAP. Moreover, they are willing to work on much slimmer margins than anyone else, figuring that their deeper pockets will allow them to outlast the competition.

I'm no fan of complicated MAP policies, but without strengthening them beyond what is allowable today, I see a much less competitive online landscape in the future.

[dickbaker]

If you are forced to advertise the higher price, and everybody else, too - why not simple charge the higher price?

Sigh.

The retailers are not forced to show the higher price. They just can't show a price lower than MAP. If their prices are lower than MAP, they must do something such as tell the visitor to add the item to the cart or to email for the price. Adding to the cart is apparently the preferable option.

This is another reason why MAP is so stupid. All the customer has to do is click to see the price.

Again, I have the advantage of being small and having little overhead. The big stores have the advantage of name recognition, higher traffic, and more credibility. If I charge MAP, I lose my primary advantage.

If I'm happy with my profit, and my customers are happy with my prices, who exactly is being hurt? You? If you're being hurt because you can't compete with me, then you have a problem that's more serious than MAP policies.

[MrHard]

If there is no "fair" then what's you issue with the manufacturer MAP setting?

They are doing what's right for them, if you can't compete on anything other then listed price that's your problem.

[dickbaker]

I'm not complaining because it's not "fair," I'm complaining because it's stupid. And my original post was to find out how folks deal with such stupidity.

[jsinger]

Remember the dot com days when some web retailers had ZERO interest in actually turning a profit on what they sold? Their goal was to keep sales rising to stoke Wall Street's fixation with predictable revenue increases. (profits be damned!)

That nonsense led to price cutting and insane ad expenditures. X10 (which sought to cash out with an IPO) and Network Solutions (which sold out for the ludicrous amount of $21 BILLION) come to mind as firms where the bottom line was of no interest to management.

Don't assume all retailers have the same goals you have.

[dickbaker]

Don't assume all retailers have the same goals you have.

I'm not sure if that comment was directed to me or another poster.

At any rate, I'm making a nice, comfortable middle class living from this. I'll be doing an expansion in the next 18 months that should increase my income substantially, and allow me to hire at least one other employee.

[jsinger]

"Middle class living." Competitors aren't always driven by that typical goal.

In some fields there are lots of hobby businesses where profit is a minor consideration. One woman told me she made less than minimum wage but adored the little business she owned. I know the wife of a very wealthy lawyer who had a cookie shop. An even more prosperous wife, formerly a CPA, opened a tiny needle point shop. I'm sure she gave little thought to her margins on thread and thimbles; hubby was worth 8-figures!

I can't explain a lot of what I see on Ebay by traditional profit-driven economics. Some people just love buying and selling junk, perhaps seeking the thrill of a rare windfall. There's a gambling element to some eBay activity.

I knew a man who set up his ex-con kid in a business just to keep tabs on him.

And like I said, there are those who work to build large businesses to flip them for profit (or sometimes just ego).

We can't assume all webcommerce shares the "normal' goal of "making a living." I'm a believer in minimum pricing.

[dickbaker]

If forgot to reply to a point:

...if you can't compete on anything other then listed price that's your problem.

I compete on service as well. My customers tell me that they've never had service such as mine from any online retailer.

As my site's reputation grows, that will--and already has--result in more word of mouth sales.

[Mesozoic]

Amazon does the add to cart to see price method. I've seen it there a lot.

[ssgumby]

dickbaker, you seem to be getting a lot of flack over this. For the record I understand where you are coming from and agree 100%. Based on jsingers analysis, I don't see me fitting into any of his categories and frankly I get tired of all the "90's .. dot com ... back in the day" babble. Yes dot com days had issues, but ecommerce has come a long way since then and most learned from their mistakes. I try to learn from history but also put it behind me and focus on the future in a forward thinking kid of way. In 4 years we have grown our business from $0 to several million in revenue with what I would consider a decent profit, in fact the profit is a bit too much because the tax man cometh ;)

My goal is to grow this business and make an excellent living and have something for my children to take on. I price my products and a fair value to the customer and a value that makes me the profit I need. I am not out to take advantage of anyone. The issue with MAP is its not fair that its not consistently enforced. If I have to charge $100 then EVERYONE should including brick and mortar .. in fact it should go further and allow ecommerce to charge lower than B&M since we also have the added shipping costs. MAP is an absolute nightmare in my book and I hate dealing with it but I must.

my .02

[dickbaker]

If I have to charge $100 then EVERYONE should including brick and mortar .. in fact it should go further and allow ecommerce to charge lower than B&M since we also have the added shipping costs.

While I appreciate the support, I don't agree with the statement above. Every merchant has his/her own unique situation. The best arbiter of price, service and quality is the customer.

[ssgumby]

yep, I agree completely .. im saying if MAP has to be then it should be equal ... my preference would certainly be to let each merchant decide their price based on their own unique needs.

[trinorthlighting]

dickbaker,

What is the % of mark up you make on selling the product currently and % of mark up you make at selling at MAP?

[dickbaker]

The percentages vary from slightly under 10% to about 15% on this product line. I use a couple of well-known competitors prices as guidelines.

The difference between my prices and MAP vary widely. On some models the difference is as little as $5, or about 2.5%. On others the difference is as much as $50, or 13%.

[trinorthlighting]

Do these items have a patent, trademark or are they copywrited materials?

[trinorthlighting]

Do these items have a patent, trademark or are they copywrited materials?

[dickbaker]

They're patented.

Also, even though I could continue to display my prices and disregard the MAP policy, the manufacturer could still come after me for use of their photographs, or even for having photographs of their products if I took my own photos.

[trinorthlighting]

That is a small mark up to go through such a hassle. Today is a buyers market, so if I were in your shoes I would look for an alternative product to sell that is similar. If not raise the price up and find other products to sell where you can make a better %.

We run into that sometimes ourselves and if it becomes a hassle like that there are plenty of other products to sell out there. Sometimes we even find knock off products that are similar, but not crossing the line of patents that work out better for us in the long run.

[gpilling]

Three Options:

1. Keep prices at MAP and give sales to competitor.
2. Complain to manufacturer until they make competitor raise to MAP.
3. Undercut like competitor, and risk being discontinued as a retailer by manufacturer.

4. Make your own version of the product and advertise it on the listing for brand name product. This is easier than you think (barring patent issues) by using small job shops and contract manufacturers.

"Buy BigBrand for $199 or our house version for $149" type thing.

[trinorthlighting]

I lean towards the alternative products as well. There are too many manufacturers in China pushing stuff these days and I am sure if you look around you will find the same exact thing for less.

[rise2it]

"I'm certain that the majority of online stores that sell this product for more than my price are buying it for the same price, or close to it. I'm simply willing to make less profit.

Why? Because I'm the new kid on the block. All things being equal, would you be more likely to buy from a big established online store than a relatively new and unknown store?

Once I get my store better known, I can consider slowly raising prices."

---------------------------

That is the WRONG approach on so many levels I don't know where to begin.

So, let's make it simple...if you don't like the rules, take your marbles and go home. In other words, find another product to sell.

We're in business for one reason - to make money...and personally, If I can sell 100 of something and make as much as someone else selling 300 of the same thing, I'm quite happy - because I KNOW the other company is going to have more at least 3x the returns to deal with, the other company is going to have more at least 3x more packages lost in transit, and at least 3x the headaches that I have...and those cut into his profits, so he's STILL not going to be making what I make at the end of the day.

As far as MAP pricing, I no longer pick up high end products unless they DO have map pricing, and the manufacturer is actually willing to take the time to go after those that fail to comply.

If the only thing you have to compete on is 'lowest price', you'll either be nothing but a memory in a couple of years, or survive but be completely miserable because the only customers YOU have are the ones that the rest of us don't really want (whiny, disloyal, etc).

[KenB]

@rise2it,

Just because you think something is the wrong approach doesn't make it so. The last I checked, we are supposed to be in a free market system. In a free market system different merchants are free to set whatever price they deem appropriate and the consumer will decide whom they'll buy their widgets from. The one thing our system has to protect consumers is a rule against price fixing. MAPs are a form of price fixing.

In a free market system there will be business models that will succeed and business models that will fail. MAPs may in fact be protecting bad business models that actually harm the consumer.

I don't always purchase from the cheapest vendor, in fact I frequently don't purchase from the cheapest vendor. However, I do see the cheapest vendors as an important part of the free market in that they force the other vendors to show extra value for the price they are asking.

Without the cut throat discounters other vendors get fat and lazy, thus the consumer pays too much and still gets substandard service. At least with cut throat pricing the consumer gets a cheap price to go along with the substandard service.

[iJeep]

This deserves a big WAHHHHHHH..

Basically, the complaint is that the distro is being pressured by a larger customer to make you raise your prices so they can make more money. Whether you realize it or not, this is all spawned by your competition.

If you do 1 million in sales, but another competitor does 10 mil in sales, they have more power with the distro than you, and will do anything to squash you so they can get your sales. That's life, that's business. We deal with it every day.

If it really bothers you that much (and you don't want to play by the rules), buy direct from the manufacturer....or another distributor.

It amazes me how much effort home based business owners put in to selling stuff at cost.

[rise2it]

I think this is an interesting discussion, simply because many of us are at different extremes in the way we choose to approach this issue.

KenB, I get your point about a 'free market system', but there's a difference between selling something that requires zero maintenance (and almost zero knowledge), and a higher end product that requires both.

However, there is nothing wrong with distributors having rules, because it's THEIR product. If you don't like those rules (including pricing), then don't sell their products. The VERY reason they do this is to keep the 'cut throats' out of their supply chain, because those people end up out of business, leaving a chain of unhappy customers in their path for the manufacturer AND remaining dealers to have to clean up after.

Another issue for the cut throat merchant will be that the customer which lowballs your price into the ground will STILL expect top-notch customer service, which you simply can't provide if you aren't making decent money from a product. These are the customers that usually end up requiring the most 'hand holding' after a sale, and the ones I've seen turn the cut-throats into very bitter business owners.

Based on two decades of dealing with this (and over a decade online), I'm going to stick with the final statement from my previous post - as these as the two situations I have (sadly) watched cut-throat competitors get into over the years:

If the only thing you have to compete on is 'lowest price', you'll either be nothing but a memory in a couple of years, or survive but be completely MISERABLE because the only customers YOU have are the ones that the rest of us don't really want (whiny, disloyal, etc).

[Bewenched]

What we have done in situations like that is one or a combination of these:

- Have the special pricing show up only when they add the item to the shopping cart.
- Offer free overnight shipping
- Offer a store credit towards their next purchase when they purchase the item.
- Note that they should call for best pricing. Prices over the phone are NOT advertised.
- Offer a package pricing, example if they buy a blue widget and a red widget then they get a discount (this is a major way around MAP pricing and a way to sell more of other items as well.

[Leosghost]

Been reading this thread with interest and waiting for some realism ..iJeep just posted it .. :)

Especially the last 2 lines ..

[ssgumby]

with regards to the last 2 lines of iJeep's post ...

Our products are in a sole distributor model. One and only one distributor can sale in a certain region. There is NO buying from Manufacturer directly.

Also, not liking MAP has nothing to do with wanting or needing to be lowest price, its about being FAIR. Again, my situation is they try to force me to abide by MAP while competitors do as they please. For the record, I have been successful in fighting the MAP issue and forcing the very people who are trying to "squash" me into raising their own prices.

The original poster was not whining, he was asking what the most elegant solution is to this particular issue.

[Leosghost]

grey market ..

you buy from another distributor ( even in another country )..or you have manufactured for you ..a similar but better ( not "copy" ..no "knock offs" ) item elsewhere ..and sell that ..

been there ..done that ..it works ..is legal ..makes money ( lots ) ..means understanding 3 things ..

1.be smarter than the competition
2.life isn't fair
3.always have plans b,c,d etc

[KenB]

The original poster was not whining, he was asking what the most elegant solution is to this particular issue.

Agreed.

From what I've gleamed from this thread the least confrontational way to deal with the MAP issue is just to require customers to put an item in a shopping cart before seeing the actual price. One way to do this is to show the MAP price with a line drawn through it and a brief explanation that the actual price is so low the manufacturer won't let you advertise it so customers have to add it to their shopping cart to see the actual price. I think online shoppers are seeing these disclaimers enough that they are starting to get used to it.

Offering free shipping is another great end run around the MAP.

[Leosghost]

Offering free shipping is another great end run around the MAP.

And when you are only making 10% markup ..like the OP has said ..presumably when you offer free shipping you'll make up your losses ( because you have to deduct the cost of your site, the domain, the hosting, your salary ..and the ones who stiff you ..see the OP's other many threads ..etc etc etc ) on the volume ?

If you are only making 10% and your name isn't walmart ..or the equivalent ..and you are worrying about "fair" and "elegant solutions" then it is a disaster waiting to happen..

Or death by a thousand cuts ..