MAP violators are a menace to retail brands. By violating the MAP policy, they not only jeopardize brand value but also hamper customer experience. MAP or Minimum Advertising Price is the lowest amount at which a product can be sold on digital shelves. This amount is set by retailers, manufacturers, and distributors to maintain revenue margins, eradicate counterfeit products from the market, and enhance a customer’s buying experience.
A study by Northwestern University states that, “39% of retailers never violate MAP on any products and 19% of retailers violate MAP on every product that they sell.” These violators who are often unauthorized sellers cause chaos in the market and need to be identified at the earliest. This is where an AI-powered violation-tracking algorithm comes into play.
What is a MAP Violation?
Manufacturers allow resellers and distributors to sell their products. When a reseller lowers the prices of a product below the MAP or ‘Minimum Advertised Price’ it is known as a MAP violation. Usually, these violations are caused by unauthorized sellers whose main concern is selling the product. They do not care about the brand value getting deteriorated, unsatisfactory customer experience, or revaluation of price. This is why it is essential for brand owners to keep an eye out for these pesky violators who can destroy the brand image in no time.
Retailers often violate the policy when they want to speed up their sales, desire higher revenues, or offer discounts. But this puts the authorized sellers at a disadvantage.
After conducting a study on Determinants of MAP Policies experts realized that the average percentage of MAP violations were a staggering 31.2% while the average depth of violation was 14.5%.
The MAP policy is put into place to guarantee consistent product value, eradicate under-pricing, endorse fair competition across multiple digital shelves, and give a fair chance to the smaller sellers in the market. It also ensures the optimum quality of customer service.
How do MAP Violations Adversely Affect Retail Brands?
After careful consideration and in-depth market research, manufacturers, retailers, and distributors come to a minimum price conclusion to tackle the problem of price ambiguity. The goal is to safeguard their brand and enable equal opportunities for sales and profit-sharing.
When retailers violate the MAP policy brand owners or manufacturers suffer from the following dilemmas.
Loss of Revenue
Revenue loss is the biggest challenge for retailers when it comes to the violation of a MAP policy. When an unauthorized seller reduces the price of the product below the MAP, customers begin flocking to their website, thus burning a hole in the other sellers’ pockets.
“Due to MAP violations the pricing power of new products gets diluted by 8-15%” – Dr. Anshu Jalora, Ph.D. in Pricing and Revenue Management
Brand Image gets Tarnished
Unauthorized sellers are usually the ones who violate MAP policies. Their lack of consideration for a brand’s image pushes them to sell counterfeit products that tarnish the customer experience of the end-user.
Disrupted Revenue Margins
When sellers adhere to the MAP policy, revenue margins are distributed equally. It gives a fair chance to all the re-sellers and ensures equal earning opportunities for everyone.
Relations with other Re-sellers and Retailers Are Ruined
Manufacturers distribute their products through a channel of resellers and retailers. When one unauthorized seller violates the MAP policy it makes the brand or the manufacturer look bad and thus ruins relations with everyone.
Spoils Customer Experience
The eventual goal of selling a product is Customer Satisfaction. Sellers who sell unauthorized products can destroy a customer’s experience. When an end-user orders and pays for an original product but gets a counterfeit product instead, they are going to get upset. This leaves a bad taste in the buyer’s mouth thus permanently ruining the brand’s image in the customer’s mind.
According to a study resellers violate MAP policies when –
The number of distributors is high
The MAP policy is about to expire soon
Resellers want to increase their sales by giving heavy discounts
The MAP policies are lenient
Low-rating sellers are flocking to the market