3 types of conflicts, the effects & ways to overcome.
As a manufacturer it is tough to find a balance between own eCommerce stores and wholesalers and retailers. Here’s the toughest thing: the buyer loves to look for ways to “cut out the middleman.”
Number one rule to keep in mind is: Begin with the customer in mind. Therewith, you create a common goal.
Maintain a standard price for products across all sales channels to find a way around any price competition between wholesalers, retailers and manufacturers.
3 types of conflicts:
According to The Good, there are 3 types of channel conflicts:
Vertical channel conflicts:
Direct & indirect Sales: when manufacturers sidestep retailers to sell direct-to-consumer and this creates competition between manufacturer and retailer.
Over saturation: too many retailers that causes price competition between retailers.
Horizontal channel conflict:
Loss leader: Significant price drop of retailer with the goal to drive traffic to its own store and upsell more expensive products.
Turf war: Battle for sales in the same territory.
Multiple channel conflict:
Occurs when a manufacturer has at least two channels competing for sales of the same brands/products. A manufacturer may be selling their products direct-to-consumer (D2C), while also selling to a wholesaler/retailer. This creates conflict because the manufacturer and retailer may be selling the products to the same markets, but at different prices.
The effects of price battling:
Brand and / or product loses value:
When in a price battle, 1 retailer pushes a price lower, other follow or go even lower. Customers get confused because of this and products loose value.
When prices are not stable, buyers know this and can wait to purchase until a price drop. Those who already bought the products and see the price drop, feel cheated, which results in higher returns and degradation of a brand.
Price battling can weaken the distribution channel:
When wholesalers and retailers loose interest in promoting, or even stop selling your products.
4 ways to make it less painful:
Offer exclusive products
Provide a unique product, only available on the brand website. Create buzz, build demand and show off your brand!
Offer product Giveaways
Add value by including an extra product. For example, the Apple gift card.
Offer bundles & Kits
Grow sales by helping customers getting more out of your products. Bundling products allows you to discount, without the appearance of a discount.
MAP policy & Monitoring
MAP pricing addresses how a reseller advertises a product, MSRP represents the price a manufacturer recommends its retailers to sell the product.
Why would you use and monitor MAP and MSRP policies?
- Protect your own margins and those of your retailers
- Protect your brand value proposition: A price that is too low, can raise red flags about the quality of your products and brand
- To keep retailers from being unfairly undersold by competitors which can lead to price wars
Please note: Both MAP and MSRP must both be set up as one-way policies and not as legal agreements between manufacturer and reseller.
A Minimum Advertised Price (MAP) Policy is an agreement between brand or manufacturer with authorized vendors.
- The agreement is to price a SKU at or above a specified minimum price;
- The agreement is not legally binding;
- Retailers can still sell a product at a below-MAP price, just not advertise it.
MAP monitoring is the routine process of reviewing the prices of your online retailers across all marketplaces to identify MAP compliance. Benefits of MAP monitoring are:
- Protect your reputations and margins;
- It will show you each of your product’s prices, who is selling that product, and where that product is being sold;
- You can contact any non-compliant or unauthorized seller and request corrective action—in some cases, even turning unauthorized sellers into authorized ones.
Curious about how SiteLucent can help you make Channel conflicts less painful?