The bank robber’s motivation is to make a lot of money fast, without putting forth a lot of effort. The same is true of the grey markets made up of on-line Minimum Advertised Pricing (MAP) violators. In both situations, the perpetrators know what they are doing is wrong, and therefore disguise themselves to avoid getting caught.
Minimum Advertised Pricing policies have been around for decades. While often mischaracterized as being a thinly veiled version of price-fixing, the underlying purpose of these MAP policies is to ensure that retailers don’t engage in a “race to the bottom” on price, and inadvertently destroy the perceived value of the brand. In fact, in addition to MAP policies, many brands have very strict distribution guidelines to continue to reinforce the exclusivity of the brand. By way of example, while Walmart may be the nation’s largest retailer, they carry no luxury brands.
For brands, MAP violations are moving from a nuisance issue to a major threat to their longer term survival. A number of large retailers are growing ever more frustrated, and vocal, about the competition they are facing from on-line MAP violators. So much so, that some brands have found themselves “in the penalty box” while they sort out their online pricing and distribution. Those brands that can’t seem to get this sorted out, risk being completely thrown of some of their largest retail accounts.
In the pre-Internet era, policing MAP policies used to be a simple as thumbing through the weekly circular to see if anything looked out of compliance. Alas, we are no longer in those bygone days, and MAP policing has become increasingly more difficult. As necessity is the mother of invention, a whole new category of internet price monitoring services has appeared over the last 3 years. Brands are now discovering that their product is advertised on the web at prices well below MAP, on sites they would never choose to be associated with.
To continue the metaphor, banks have installed the latest camera technology for a two-fold purpose: discouraging would be bank robbers, and secondarily catching bank robbers on film. The same can be said of the many brands that have started using “Internet Price Monitoring” services to capture the web addresses of MAP violators. In both situations, the perpetrators disguise themselves to avoid getting caught, and the bank film/internet address, in isolation, adds little value in solving the problem.
It is only when the bank image is coupled with solid detective work, based on clues found at the scene of the crime, that it is possible to identify the person behind the mask. Once the true identity of the bank robber is known, it simply becomes a case of going out and arresting them.
Unfortunately the same parallel holds true for Brands that get a download of offending websites from the internet price monitoring service (the equivalent of a photograph of a bank robber). Only when brands deploy additional research and investigative resources to identify the true identity MAP violators can they move from monitoring MAP violations to addressing the supply chain that supports these rogue web sites.
Minimizing grey markets and online MAP violators requires a comprehensive approach that goes much further than simply enlisting a price monitoring service. And that, I can assure you, is money in the bank.
David Coleman is the CEO and Founder of Brandoogle (brandoogle.com) and can be reached via e-mail at dcoleman@brandoogle.com. Brandoogle works with both Retailers and Brands to improve margins and combat grey markets using a proprietary suite of software and services.