Fresh off a string of retailer meetings, a client called me today suggesting her retailers could benefit from a course for manufacturers on how to successfully implement, administrate and execute a Retail Price Maintenance (RPM) program. The two common RPM programs are the Unilateral Pricing (UP) policy or ‘Colgate’ policy her company executes and the popular Minimum Advertised Price (MAP) policy.
She went on to say…
“Not just announcing a policy, monitoring for violations and signaling commitment to enforce. The ‘complete package’ of best practice processes, distribution discipline, channel management and an intelligent Internet strategy to support the policy, like we did.”
I liked what I was hearing…
“Since we cleaned up the market, our revenue with my key partners is growing between 20-35+% month over month, profit is where we both what it to be, our D2C business is trending up 40+% and they’re telling me the same thing is happening with the other clean, well managed brands. They are screaming for brands more interested in turning profit than turning boxes!”
Her enthusiasm was building..
“For them to be competitive, to remain in business, they’re making big investments in technology to improve every aspect of their customer experience. They need more manufacturers, like us, they can confidently partner with to secure stable profit, and predictable revenue, and to effectively collaborate to support our brand experience.”
She was truly excited about her brand’s relationship with these partners!
“They’re frustrated so many ‘heritage’ brands with good intentions only ‘announce, monitor and signal’ their MAP policy without addressing their old school ‘moving boxes’ transactional behavior. So many believe the policy is a panacea for their online price erosion and undisciplined distribution, and it’s not.”
As I listened, I smiled: I’ve been searching for impactful content for my first blog and here it was!
While an in-depth course for the future makes sense, let’s start with some ‘insider secrets’ to success.
MAP/UP Policy Do’s:
- Do ‘solidify’ your ‘leaky’ distribution network – Executing distribution discipline by carefully selecting retailers to align with defined channel and Internet strategies is what is really required to implement an RPM program and truly combat online price erosion.
- Do what you say you’re going to do! – Most manufacturers don’t, and retailers will test you, push back and watch the market to see if you’re the real deal or just another of the many fails. Proving your commitment everyday by implementing the policy as written, regardless of violator and using your teeth when necessary is what will make or break your success.
- Do aggressively suppress unauthorized Internet sellers – RPM programs and enforcement don’t apply to unauthorized sellers and are not effective until unauthorized sellers are suppressed. There are effective methods to managing their impact on your pricing and authorized retailer actions.
- Do administrate and enforce within legal department and/or sales operations – The process of enforcement and communication must follow the policy consistently and uniformly. Legal team is ultimately responsible and needs to be involved. Sales administration is not commissioned, knows the sales team, retailers and go-to-market strategies.
- Do authorize ALL retailers, direct and indirect – Being in the ERP system isn’t enough. Authorization requires executed agreements, key contact information with email addresses and all online URLs and marketplace stores. You need recourse, leverage and insight on who your retailers are, what they’re authorized for and where they can sell. Bad data is bad analysis is bad enforcement is lack of control.
- Do have an Internet strategy – Accumulating hundreds of Internet sellers by allowing any of your brick and mortar retailers with a website to sell your products is not a strategy. You must have standards and processes to determine if they are going to add value to your brand and not be disruptive.
- Do have an Amazon strategy – 2.4 billion shoppers visited Amazon last month, 47% of US Internet shoppers started product searches on Amazon and only Amazon can block marketplace access. Zero Amazon sales or allowing a retailer manage it for you or allowing any retailer who requests to sell in the marketplace, is not a strategy.
- Do have an eBay strategy – eBay has big plans to triple their active user base and bolster their digital marketing budget and they should not be ignored. Consolidating and offering refurbished, seconds, and close-out products with direct B2C sales and/or limited partners gets you in, and limits other channels from model confusion. Access to their VeRO platform is necessary to remove unauthorized sellers from their platform.
- Do have a Google e-commerce marketplace strategy – Yes, Google is building a shopping platform! The company recently surpassed 500 selling storefronts including Best Buy, Target and Walmart.
- Do have a presentation overview of your ‘complete package’ for your retailers – Retailers are asking “What are you doing about price controls?” You must be prepared to share an end-to-end plan of best practices for what you are doing, how your are doing it, where you stand in the process, results achieved to date and intended results. By effectively and transparently communicating a documented ‘complete package’ you will clearly delineate your brand plan from the ‘announce, monitor and signal’ plans. It’s not about the policy it’s about the actions taken and commitment to continue taking them.
MAP/UP Policy Don’ts:
- Don’t think the damage you may create can’t be worse than the benefits you intend – Implementing, tracking and communicating policy specifics for each violation and subsequent escalations is an extremely complicated activity. Best intentions don’t count with your retailers, they are looking at your actions for the trust and integrity you need to demonstrate for the policy to perform.
- Don’t underestimate the human resources required for monitoring MAP policy violators – It looks so simple! However, it’s not until you’re heavily invested into the process that all the data and technology complexities show themselves. The implementation and execution of a MAP policy along with coordinating the online reporting is a significant undertaking!
- Don’t outsource automated enforcement – You must own all facets of executing the policy; there are too many product, pricing and timing dependencies, as well as relationship complexities and legal ramifications to risk outsourcing to a third party.
- Don’t put MAP on every product– Retailers need some of your assortment to promote outside of your scheduled promotional windows.
- Don’t create a ‘promotion’ to cover for a retailer – Last minute MAP promotion announcements to cover a retailer price drop advertisement is not a promotion, it’s the beginning of the end of your policy integrity.
- Don’t provide ANY flexibility on price in the policy, no ‘up to 10% off’, not even 1¢ – Avoid the slippery slope. The bottom of any range becomes the price. Then they’ll be asking for a new bottom, draw a solid line from the start.
- Don’t monitor every product – No progress is made analyzing hundreds/thousands of daily ads from hundreds of product listings, plus the service and internal resource costs are crazy. Limit to new, key and high value products to draw out and identify prolific unauthorized sellers.
- Don’t send a press release announcing or reinforcing policy – There’s no value in ‘announcing’ commitment, only in executing commitment. It’s like Fight Club; you don’t talk about Fight Club. Say less, do more
- Don’t distribute policy and pricing communication through sales teams – Your most important retailer communication must be sent directly to the proper retailer contacts, with tracking and archiving. It’s 2018 and we have digital systems, use them. Retailer communication must come directly from corporate.
- Don’t involve commissioned sales team members in the enforcement – In addition to potential bias, this also creates animosity, ill will, and relationship issues with retailers, it should not be a component of the relationship.
- Don’t administrate within commissioned sales team – Administration and maintenance are best accomplished within the legal team and/or sales operations. Enforcement action must be determined by a senior management committee balancing policy integrity, relationships, and implications.