No matter how skillfully you draft your reseller pricing policy, and how careful you are to make sure your entire retail channel receives it, you could still face many hurdles from within your own company that will make it more difficult to implement the policy effectively.
In this short lesson, we’ll review the most common internal challenges that can undermine the success of your reseller pricing policy. We’ll also discuss the best practice for overcoming each one.
1. Status-quo bias and inertia
Here at TrackStreet, we’ve worked with thousands of brands over the years, many of which have come to us after an unsuccessful attempt at rolling out a reseller pricing policy. We’ve found that one of the most common reasons for this failure is the staff’s unwillingness to move away from its legacy processes.
What you can do about it:
The best strategy to break through this inertia is to discuss the policy in depth with your team. Call meetings with the departments affected by the new policy, sales and eCommerce teams, executive stakeholders, etc., and discuss the reasons behind the policy. Only when they understand the many benefits the policy promises to deliver to your business will they be willing to make the necessary and difficult changes to the approaches they’ve been taking up to this point.
2. Conflicting agendas in-house
Another threat to your policy’s success is the fact that some people in your company, particularly the sales reps whose livelihood depends on their relationships with your resellers, could fear that the new policy will hurt their sales numbers. If your sales department has this concern, then they might ignore your policy’s guidelines or even actively work with your resale partners to find ways around it.
It’s true that when you implement a new reseller pricing policy, it could create a short-term slow-down in your rates of sales. After all, your new policy means you’ll be stopping your sales department from offering discounted prices below a certain amount, a process your in-house team might have engaged in for years to make their retail partners happy and hit their sales quotas.
What you can do about it:
Just as with the inertia challenge, here the best strategy is also communication. You don’t want to simply roll out a reseller policy and tell your in-house sales teams to read it and start following its guidelines and restrictions. You want to clearly and persuasively explain why this new policy is great for everyone—your sales team, your brand, your retail partners, and your customers. You also may want the person responsible for administering the day-to-day program details, to be able to act independently within your organization, and outside of the influence (and reporting structure) of the sales team.
3. Failing to implement proper enforcement tools
Drafting and publishing your reseller pricing policy are only the first steps in protecting your business against price erosion, the loss of key retailers, and other types of brand damage caused by failing to control your products’ pricing. Equally important are the follow-up steps: consistently monitoring the resale landscape for violations and aggressively enforcing your rules with offenders.
Many manufacturers make another strategic mistake here. They try to manually monitor their reseller network and enforce take action against violators. The problem with this strategy is, in the internet era, any of your authorized dealers could drop their prices below your approved levels at any moment on any of thousands of online marketplaces and eCommerce sites.
The resources (people, time, expertise) needed to effectively monitor and enforce a MAP or MRP program are simply too great for most businesses to manage the process in-house. And you cannot expect your staff to effectively and reliably enforce your pricing policy if you don’t equip them with the right tools to do so.
What you can do about it:
The best practice here is to sign up for automated price-monitoring and enforcement applications. TrackStreet’s comprehensive brand protection platform is one example.
4. Fear of losing key retail partners
Sometimes a manufacturer will develop, draft, and even publish a reseller pricing policy with every intention of aggressively enforcing it.Â
When that time comes—when someone in the company catches a reseller violating one of the policy’s guidelines—the employee will be worried that enforcing the policy’s consequences could drive the company away permanently.
Ironically, failing to take appropriate action against a violator can produce the very result the employee wants to avoid. Imagine one of your lucrative retail partners—maybe you sell through a national store chain—discovers your team hasn’t been consistently enforcing your policy, and instead is allowing pricing violations by some of your online resale partners to go unaddressed. That store chain might decide it’s no longer worth doing business with your brand, because while they’ve always honored your pricing guidelines, you’re allowing their competitors to get away with—and unfairly undercut them.
What you can do about it:
You’ll want to educate your team about the many benefits of consistently monitoring the resale landscape for your products’ pricing—ideally using an automated solution, which can scan the internet for violations every minute of the day. One point to make will be that by enforcing your policy, you’re sending an important signal to every one of your resale partners that you are actively working to protect their interests and keep the playing field fair.
5. Lack of knowledge about the policy
Manufacturers can also find themselves failing to consistently enforce their pricing policies simply because some of their employees don’t know the details of the policy’s guidelines.
This often happens in businesses with high turnover. If in-house sales reps leave and new ones replace them, and those new reps don’t learn about the company’s reseller pricing policy, they could make an entirely innocent but dangerous mistake when a reseller calls asking for a discount or an exception to the standard pricing.
What you can do about it:
Our recommended strategy is twofold. First, build training on your reseller pricing policy into your company’s onboarding process. Every new employee should learn the details of your policy, learn why you’ve implemented it in the first place, and learn what to do when they receive a reseller inquiry about it.Â
Second, appoint a designated policy administrator and funnel all inquiries about the policy to this person. This will help you create a consistent response to requests from different sellers, which will help you avoid the legal pitfalls these policies can create, and it will help ensure that your employees don’t innocently agree to change the rules one time, for one reseller—which could both harm your relationships with other sellers and even put you in legal jeopardy.
6. Not enough room to be flexible
A manufacturer could find its staff unwilling to enforce its reseller pricing policy because the consequences for violations are so strict. Employees may fear that imposing the consequence for just a first-time offense could drive away a longtime retail partner. They might also fear that the policy’s rules are so draconian that they will turn off new retailers from joining the company’s Authorized Dealer Program.
Even a strictly written policy can and should leave room for exceptions that can be addressed on a case-by-case basis. For example, your company might want to relax your pricing rules across the board during the holiday season. You might want to empower your team to distinguish between an intentional violation and a legitimate mistake. And for very limited circumstances (say, a retailer asking to celebrate its 50th anniversary by offering discounts on all products, including yours) you might want the freedom to make an exception to your minimum pricing guidelines.
Note: In this last example, it will be perfectly legal to make an exception to celebrate a retail partner’s 50th year in business. But to stay on the right side of the law, you will need to be willing to honor a similar request from another retail partner with an anniversary coming up.
What you can do about it:
Too much rigidity can actually make your policy less effective because your team will be less comfortable enforcing it. Our advice here: Write your policy with clear rules and consequences, but leave some room for reasonable exceptions—for mistakes, for one-time occurrences, etc.
7. Legal concerns about enforcing the policy.
As we’ve discussed throughout this course, there are many misconceptions about how antitrust law views reseller pricing policies. If they don’t know the reality, some people in your organization, possibly your legal team, might be concerned about the regulatory risks of rolling out and enforcing a pricing policy. Maybe they’ve read about historical decisions finding similar policies violated antitrust law.
If you don’t take measures to address these concerns and misconceptions among your staff before you roll out your policy, you might find them actively working to undermine it, and believing they’re helping your company by doing so.
What you can do about it:
Here, our recommendation is to educate your staff about the realities of reseller pricing policies and the law. Specifically, you’ll want to explain that in the overwhelming majority of instances, MAP and MRP policies—as long as they are properly drafted and enforced—are deemed perfectly legal by the courts and never challenged by antitrust regulators.
You’ll also want to have documentation to back up your claims for employees who might still be skeptical. For example, you can send these colleagues to a white paper written by TrackStreet legal consultant Eugene Zelek, an experienced antitrust attorney and senior counsel for the firm Taft Stettinius & Hollister LLP:
How to Create the Right Reseller Pricing Program for Your Company.
This paper discusses how antitrust law has become even more favorable to reseller pricing policies in recent years. It also outlines many of the reasons that, as long as you are careful in how you draft and enforce it, your reseller pricing policy shouldn’t draw the attention of any antitrust regulators.
Quiz time! Let’s get to it.