A reseller pricing policy refers to one of several policies that a manufacturer or brand owner creates to establish guidelines for how its retailers may price the company’s products for end-user customers. The most widely used reseller pricing policies are Minimum Advertised Price (MAP) and Minimum Resale Price (MRP).
MAP policies reflect a manufacturer’s minimum allowable price levels for a retailer’s advertisements of its products—for example, the price displayed on the product’s Amazon listing page, in a newspaper ad, and in some cases even in the shopping cart page on an eCommerce site.
MRP policies are broader in scope. Like MAP policies, they set minimum advertised price levels for retailers. But they also go further—establishing a floor on the price that a retailer may actually sell the product to a customer. MAP policies, by contrast, allow a retailer to negotiate price privately with individual customers and sell the manufacturer’s products for any amount they choose.
(Note: Some companies refer to their MRP policies as Minimum Retail Price instead of Minimum Resale Price. Although the names are different, the substance of the policies are the same.)
We will discuss both MAP and MRP policies, as well as a few variations, in future modules. For now, let’s explore the basics of reseller pricing policies in general.
Why Would a Manufacturer or Brand Want a Reseller Policy?
There are many ways a manufacturer or brand owner can benefit from drafting, publishing, and enforcing a reseller pricing policy. Here are the most common:
- Prevent price erosion
If one reseller online drops its price below all of your other retail partners, hoping to grab some quick sales, that can lead your other partners to do the same. Before long, your products could be the subject of an online price war, which can erode your brand’s perceived value in the marketplace. Establishing and enforcing across-the-board minimum advertised prices for your products will help you maintain your brand’s image of quality across your product line and your entire channel of retailers and resellers. - Improve relationships with your best sellers
Imagine one of your largest retailers—a national bricks-and-mortar chain—invests heavily in carrying your inventory. They place bulk orders, train their in-store reps to sell your product, and set up displays to make your products available for customer demos. If those retailers find you failing to enforce minimum advertised pricing across your sales channel and allowing their eCommerce competitors to undersell them, they’ll be less likely to continue investing in your brand. Your resale partners have plenty of choices when it comes to which products and brands to invest in selling. To the extent that you can show your honorable retailers that you are looking out for their interests—and that’s precisely the signal you send when you roll out a reseller pricing policy—you will earn more trust and loyalty from those retail partners. - Attract more high-quality retailers
When you publicize and consistently enforce a reseller pricing policy, you’re sending a clear signal to new retailers: We will protect your margins and your interests if you join our resale channel. It’s worth investing in selling our products. In the Internet era, when any seller honoring the pricing guidelines of its supplier can be undercut at any moment by an online rogue retailer, the high-quality retailers you’d most want as your sales partners are more likely to be drawn to your brand if you’re actively enforcing a pricing policy that would protect them against such unethical retailers. - Increase margins over time
It’s true that in some cases implementing a new reseller pricing policy could create a short-term dip in your rate of sales—because the retailers who were offering your products at bargain-basement prices can no longer do so. But the reseller pricing policy you’ve drafted and are now effectively enforcing will soon clear away much of the steep discounting of your products by retailers. This means that over time your margins will increase, as consumers realize the rogue sellers offering your products at bargain-basement prices have been driven out of the game. - Enhance brand value
As your reseller policy helps to keep a consistent minimum price level associated with your products, your brand over time will likely enjoy a boost in consumer perception. To the extent that it’s difficult or even impossible to find a company’s products available at steep discounts — think Apple or Disney, for example — those companies tend to enjoy a greater sense of perceived value. This is why implementing a reseller pricing policy isn’t just about preserving your products’ margins; it’s at least as much about protecting and growing your brand value over time. - Discover new opportunities
Finally, one tremendous benefit of rolling out a MAP or MRP policy and enforcement process that many manufacturers overlook is its potential to provide you with the market intelligence to help your company identify lucrative sales and business-development opportunities you might otherwise miss. If you deploy the right price monitoring and brand protection platform, you can automatically capture and analyze a wealth of market-intelligence data. You can learn, for example, if a retail partner is carrying some of your products but not others, if a retailer you’re not already working with is selling a competitor’s products; and the effects of your pricing changes over time have had on your rates of sales.
5 Things to Know About Reseller Pricing Policies
In later modules, we’ll get into the details of drafting, implementing, publicizing, and enforcing a reseller pricing policy. For this introductory module, we will briefly discuss a series of key components.
- They should be short.
The objective of any brand’s reseller pricing policy is for its resale partners to read the policy, understand it, and adhere to its guidelines. For this reason, you will find that the most effective MAP policies are only a couple of pages (not including the list of MAP prices themselves, which can be linked to the policy but maintained on a separate web page).
- They should be written in plain language.
Because you want your resellers to read and understand all of the rules and consequences of your MAP policy, you should write the policy so that it would be clear to any intelligent layperson. Do not make the common mistake of drafting your policy in confusing legal jargon. Yes, you can and should enlist the help of experts in developing your MAP policy, whether those are brand protection experts or an antitrust law firm. But make sure the policy’s actual language doesn’t require a law degree to understand.
- They should benefit all parties.
If you draft and enforce your MAP policy correctly, it should help both your company and all of your authorized resale partners. As we stated above, there are several ways that your resellers benefit from working with brands that enforce reseller pricing policies. It helps to preserve the profit margins for each of resellers, for example, and it protects your retail partners from getting stuck with inventory they can’t move because a competitor is unfairly underselling them. Because your policy will help your partners as well, you should state this fact right in the language of the policy itself.
- They should be unilateral.
As we’ll discuss in a future module, some reseller policies can legally be drafted as two-way agreements. But because this can expose the manufacturer to legal risk from antitrust regulators, it’s best to craft your MAP or MRP policy as a “unilateral” statement. This means both that you do not consult any retailers or other manufacturers in developing your policy, and that you are not structuring the policy as a contract that your resellers have to agree to follow if they sell your products. They are free to violate your pricing guidelines, and you are then free to enforce the consequences you’ve described in the policy.
- They must be enforced consistently.
If one of your lucrative resellers violates your MAP policy for the first time, and your company issues only a warning, you cannot then terminate your relationship with another first offender in your resale network if that seller is deemed “similar.” If one of these sellers is a large bricks-and-mortar chain of retail stores, and the other is a pure eCommerce company, you can treat those companies differently. But your company could find itself on the wrong side of antitrust law if you don’t enforce your pricing policy consistently across all similar sellers.
Time for a short quiz to see what you’ve learned about reseller pricing policies.