How Brands Take Back Control of their E-Commerce Pricing Strategies
Premium products being sold off cheap online? An absolute disaster for any brand. But for a manufacturer to respond, they have to know the latest sales prices across a range of e-commerce platforms. A RRP/MAP monitoring solution is the answer to help maintain a clear overview.
The Mission: Achieve a Brand-Compliant Pricing Strategy Across All E-Commerce Channels
When it comes to product sales pricing, each choice is a careful strategic decision. For premium brands, the price is an important differentiating factor compared to cheaper suppliers. Products with a high price tag appeal to target groups with purchasing power and are generally seen as more valuable.
Over on their own D2C channels, manufacturers set their own sales prices. Retailers, on the other hand, aren’t bound by the manufacturer-led RRP, and can instead decide their own prices. But a pricing strategy only works if it holds true across all channels – online stores, marketplaces, and so on.
That’s why manufacturers have a keen interest in ensuring:
- that the RRP guides the actual retail sales price for as long as possible and
- that products aren’t sold off at dumping prices (or with major discounts).
After all, they have a brand image and profitability to uphold.
The Challenge: No Overview of Up-To-Date Retailer Sales Prices
Your own brand is extraordinarily precious. Manufacturers aim to retain as much control as they can over products, product presentation and prices. But market dynamics and the sheer number of e-commerce channels makes this an extremely challenging goal. Not least when it comes to pricing policy.
While in the U.S., for example, brands are contractually allowed to set the minimum advertised price (MAP), over in the EU these kinds of regulations are prohibited to protect consumers from artificially inflated prices. Companies are only able to decide desirable MAPs internally for themselves, meaning, at least in theory, every retailer can set their prices as low as they want.
But what happens when retailers lower prices too quickly or too far?
- When one retailer opts for an aggressive pricing policy, competitors inevitably follow suit. This creates a downward price spiral.
- The manufacturer, too, is forced to lower prices on their own D2C channels. Margins shrink.
- Brand image suffers when high-quality products are sold off at relatively low prices.
- When new products hit the market (e.g. a phone model or seasonal fashion collection) customers wait to buy, knowing that prices will soon plummet.
- Customers get used to discounts and are increasingly unwilling to pay full price. The result: the manufacturer has to adjust their prices downward moving forward.
- Worst-case scenario, product quality suffers under all this price pressure. Think cutting corners on materials to keep the price competitive.
Strategic initiatives are a great way for manufacturers to counteract these sorts of developments. But to do so, they first need a proper overview of which product is sold by which retailer and at what price. If you start thinking about all the different online retailers, large and small, through which they sell often wide ranges of products, this begins to look less realistic. After all, you’d need to create – and constantly update – endless price lists.
The Solution: RRP/MAP Monitoring for Total Sales Price Transparency
Automated RRP/MAP monitoring affords manufacturers absolute transparency over online sales prices across all retailers. The software trawls online stores, marketplaces, price comparison sites and other e-commerce channels, where it automatically identifies its own brand products, checks through all the prices and creates a clear presentation of the data using analysis dashboards.
As such, e-commerce managers can easily evaluate the price data to establish the following information:
- How many and which retailers are undercutting the minimum advertised prices (MAP)?
- How many and which products are affected?
- Which channels or retailers are undercutting the MAP on a particularly frequent basis?
- How long does it take from product launch to the first MAP undercut?
- How many and which retailers are sticking to the MAP for a long time?
This allows companies to spot downward price spirals early on. Specific events can even trigger automatic notifications – for example, if a retailer lowers the price below the threshold or the price falls below the lowest price to date. It’s also worth remembering that unusually low prices can be a sign of counterfeit products, which manufacturers should investigate.
What Can Manufacturers Do?
A solid market overview helps manufacturers improve their pricing strategies and how they work with retailers. Nobody likes price dumping, and retailers like high margins too! More often than not, discounts are a reaction to stock that has to be sold off quickly. Talking to your retailers can help you work out why, allowing you to help find solutions to prevent this from happening in the future.
That said, some retailers deliberately pursue an aggressive pricing policy or boost sales in the short term with price wars. This is an opportunity for manufacturers to revise their distribution strategy to ensure their range is placed on the market in the best possible way. For example, why not try making exclusive products available to your best sales partners with brand-compliant product presentation?
Ultimately, customers are happy to pay more for their favorite brands, meaning the best way to keep prices high is with a strong brand and high-end products. High-quality product content combined with high visibility create trust and increase conversion. Manufacturers can analyze online customer reviews to gain a better idea of how to optimize their offers. When products are popular, retailers won’t cut prices unnecessarily and forego their margins!
The Result: Protect Your Brand, and Your Margins
A price strategy is only effective if it is reflected in the market. GATEKEEPER affords manufacturers a complete and transparent overview of the latest online retail sales prices, allowing them to derive future strategies and take action with the results.
At the heart of any company is its brand, and this needs nurturing and protecting. Offering RRP/MAP monitoring, GATEKEEPER is the ultimate tool for this. Integrate the solution with the XPLN suite for Digital Shelf Analytics: a comprehensive e-commerce solution to protect your brand and maximize sales.
Get to know our solution for RRP/MAP monitoring. We would be happy to discuss your individual use case in a free and non-binding demo.