With fast fashion e-commerce sites and large e-retailers like Amazon working to provide consumers with the hottest products at barrel-bottom prices, knowing what to price your goods and how to implement it effectively can be difficult. We spoke with Mike O’Neill, enterprise sales manager at ORIS Intelligence, a provider of actionable insights that preserve pricing integrity for manufacturers, about pricing strategy and how to structure it in the digital age.
How has e-commerce affected brands’ pricing strategies?
The online consumer has more access than ever to engage directly with the brands they love while also being inundated with new brands they wouldn’t have otherwise been on their radar. Price positioning among this new set of competitors while maintaining price parity across a vast new set of sellers is more difficult than ever. As more brands and sellers move toward omnichannel, it is more critical than ever to maintain advertised pricing parity across all sellers.
What are some of the biggest factors to consider when developing a price recommendation?
Margin at Every Level: Will the brand, and subsequently the retailer, experience the profit margins required to sustainably market, sell, and provide post-sale support of those products? Also, ensuring a healthy balance of traditional retail, online, and the highest-margin direct-to-consumer channel will help brands weather any storm.
Competitive Positioning: How does the brand want the consumer to perceive the product compared to the brand’s competitors and within the rest of the brand’s own product line? A higher price position signals to the consumer that the product is of better quality, while a lower price may signal the opposite.
Distribution Strategy: Where the products are sold and how those sellers are perceived by consumers should be balanced by the margin offered to different types of sellers. For example, brick-and-mortar retailers are exposed on a scale that most new e-commerce channels are not. I would argue that front-end margins offered to most online-only sellers are too high and are enabling many of the gray market activities and pricing games being played that brands combat every day.
What’s one of the biggest mistakes brands often make when it comes to pricing?
Ensuring that sellers acquiesce to the pricing recommendations and allowing discounts to linger. Brands spend ample time and resources in developing, marketing, and bringing new products to life, but often fail at putting adequate resources in place to ensure that pricing is maintained once the product hits the online shelf. The hoopla around launching a new product or line quickly fizzles when sellers are able to find the product online at 20 percent off within the first week. The strategy around how to monitor and maintain pricing integrity should be as much of a part of the planning as coming up with the prices themselves.
How do pricing inconsistencies affect brands and how can they protect against this?
Pricing inconsistencies have the biggest impact on trust. Sellers quickly lose trust that the brand will protect the margins they were sold on, which shifts their loyalty and customer base to brands they can rely on to provide the sustainable margins they need to survive. The biggest way a brand can protect against pricing inconsistencies is to implement a systematic approach to monitoring their seller’s listings through services like ORIS Intelligence’s PROWL software, which proactively monitors the web for all listings of the brand’s products. The product pages PROWL discovers are then rechecked in near real-time for price changes occurring most often at times when sellers believe the brands are not watching—during nights and weekends. PROWL’s always-on approach combined with a streamlined case management system ensures that brands can focus their time on enforcement rather than a manual discovery of listings in an ever-changing sea of sellers.
What is the best course of action for brands who discover their merchandise is being sold by an unknown seller (price-wise)?
Step one is to understand the scale of the problem and build a strategy from the top-down, rather than getting caught in an endless game of whack-a-mole. Build a scalable strategy that first identifies all sellers of their products, then focusing on those who are advertising below the recommended price. I believe that a pricing policy is only as good as you can enforce it, and the best way to enforce it is to understand who is selling your products and where they are getting your products from.
How can manufacturers get more retailers to follow their MAP policies (and avoid violations)?
Brands that create a MAP policy, send it out once, and only remind sellers that the policy exists when an update to the policy is made are bound to fail. Communicating a MAP policy as broadly as possible and reminding sellers that their failure to acquiesce with the policy may result in penalty or termination is critical—and following through when violations are found is even more so. As soon as a seller fails to acquiesce to your policy, the brand should unilaterally enforce and be willing to go as far as terminating those sellers based on the policy as it was written.