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Price Control PoliciesImpact of Latest Developments On You
KAM ZARDOUZIANAUGUST 8, 2014OUTDOOR RETAILER SHOW | SALT LAKE CITY, UT
Kam Zardouzian@KamZardouzian
Twitter | InstagramPrice & Channel Monitoring
Price Protection Policy &Minimum Advertised Price Strategy Consulting
Today’s AudienceWho are you?
By show of overhead clapping:1. Manufacturing Brand(s)2. Distributors3. Dealers / Retailers4. Consumers5. Media6. Lawyers7. Price Monitoring & Management co: CIQ, BPA, etc.8. NSA / FBI / FTC / TSA …
⇒ Participants: majority manufacturing brands followed by retailers, legal and consumers.
Kam ZardouzianBrandSkout & Flight Boards Hawaii
Disclaimer: I am not a lawyerTech & consumer sporting goods exec | currently Biz Dev guy @BrandSkout & Brand Ambassador at Flight Boards Hawaii
★ Technology (1992-2003)○ eCommerce systems○ Targeted content○ Real-time content streaming○ Content distribution system○ Targeting & Personalization
★ Cycling industry (2003-2013)○ USAC Coach - UC Santa Cruz, Peaks Coaching, Raceplan, Del Mar Criterium○ Capo Cycling Apparel - Regional sales manager○ WD-40 BIKE - US National sales manager
★ MBA University of San Diego★ @KamZardouzian >> LinkedIn >> Instagram >> Google+
Presentation GoalsGeneral review of price protection policies, brand protection strategies & sales channel management and impact on manufacturers (hereafter brands), distributors, dealers (hereafter retailers) & consumers.
By the end of this presentation you should....1. have an understanding of the general terms associated with price control --
brief history presented2. have an appreciation for the desired effect of price control strategies by
brands, distributors, and retailers & on consumers3. gain a general idea of the current status of price control developments,
deployment & enforcement strategies4. be able to articulate your personal constructive opinion for supporting or
not supporting price control activities
Common Definitions★ Manufacturer/Brand, Distributor, Dealer/Retailer, Consumer
vs Customer★ Price Protection Policies (PPP, TripleP)★ Resale Price Policy (RPP) -- aka Colgate Policy if unilateral★ Minimum Advertised Price (MAP) program
○ UMAP -- unilateral minimum advertised price○ IMAP -- internet minimum advertised price
★ Resale Price Maintenance (RPM) -- brands & distributors★ Manufacturer's Suggested Retail Price
○ Suggested Retail Price○ List Price○ Recommended Retail Price
Advice
★ PPP works best with products with higher rates of price elasticity of demand.★ ^Brand Equity = ^ Demand = ^ Discount Target
Takeaway 1There is a critical difference between Policy & Agreement
★Policy is non-negotiable, clear & uniformly applied -- ex: if you drive under the influence & get caught, there will be consequences.
■ A clear If/Then formula■ Resale Price Policy
★Agreement can be subject to allowances -- ex: if you buy your appliance through us, you will receive free shipping & recycling of your old one.
■ If/Then formula with an allowance■ Minimum Advertised Price Agreement or Program
Takeaway 2If you’re a…..
★ Brand: Brand equity is important, protect it. Price is arguably the most impactful variable in your marketing mix (Px4) so protect it.
★ Distributor: you are a broker between your brands & retailers in your portfolio, proactively work with your customers (brands & retailers) to help keep the playing field level >> partner with monitoring companies & provide VAS to brands you represent
★ Retailer: report cheaters & move on, focus on your business, request brands to review their policies with you & encourage use of MAP programs as they were originally intended (training, co-op & rebates)
★ Consumer: please shop local...support your local economy by paying a few extra dollars. You’ll help the environment as well.
Brief HistoryGolden era of the railroad, late 1800’s
★ The development of the Railroad Super Highway○ High capital investment○ High risk○ Led to companies wanting to protect their investment & risk○ Led to powerful alliances between companies involved, including those providing ancillary services
such as food, fuel & raw materials
★ Prior to 1890 at least 26 states had some form of antitrust law in place★ In Ohio, Standard Oil attorneys devised a new type of trust to overcome
prohibition against companies owning stock in other companies. Using this super trust ninja, Standard Oil controlled fuel oil, lead & whiskey
★ In 1890, The Sherman Antitrust Act was authored by Senator John Sherman (R. Ohio) not to protect competitors, rather competition & the competitive landscape
★ Aimed at monopolies, real or perceived, and cartels★ Enforcement was immediately an issue -- You can't enforce something you're not
aware of (proactive monitoring / policing)
Why Price Control -- Brands1. Protect Brand Equity -- Corvette vs Chevy
a. Trust + Loyalty + Emotion = Commerce2. Marketing 4 Ps: Product, Price, Promotion & Place (Distribution)
a. Price protection > Brand Equityb. Price is directly linked to perceived value
3. Part of margin should help pay for R&D4. Aims to level competitive playing field so long as you are committed
company widea. Clear + Consistent + Updatedb. Control distributionc. Manage value-add programs (services, education, showrooms,
etc.)
➔ Take Away: Brand Perception = Equity...Own It!
Why Price Control -- DistributorsAs intermediary between brands & Retailers, distributors can play integral
role in PPP management1. Historically have pursued PPP enforcement passively2. Support the brands you represent3. Support Retailers, ensure accounts compete fairly4. Interest & involvement is closely tied to relationship with brands &
Retailers
➔ Take Away: Rise up to proactively participate in keeping playing field level
Why Price Control -- RetailersContinued cut-throat global fight for the consumer’s attention & patronage.1. Request review of PPP from brands & distributors2. Request clear review of MAP Program, participate & insist on co-op
programs – similar to a company matching 401K plan…max it out!3. Get to know monitoring program & request demo if possible 4. Adopt Neighborhood Watch Practices -- inform brands/distributors when
flagrant violations happen5. Build your business, focus on your customers, build loyalty, focus on
what’s in front of you & not your rear-view mirror
➔ Take Away: • Brands want to partner with you. Your voice matters.• Unless you’re a discounter, work with brands that have proactive PPP
in place, learn their systems
Trends (part 1)1. Antitrust lines still continue
to be blurry 2. Brands deploying more
stringent PPP practices -- proportional to premium nature of brand
3. Technology integral in monitoring price & channel activity -- BrandSkout, CIQ, BPA, etc.
4. Continued reliance on voice of retailers
e Commerce will continue growth -- Graph source: Prof Aswath Damodaran, NYU
Trends (part 2)1. Distributors actively supporting brands, weeding out repeat
offender Retailers – ex: QBP & Hawley have monitoring partnerships in place
2. Retailers adopt or adapt strategies – leverage available resources from Brands & Distributors
3. Consumers will continue to be price sensitive & shop online:a. Desire for best price blinds them from supporting local
economy, etc.b. Puts responsibility on Brands & Retailers to win them on
VAS
Current State of PPP -- Brands★ Margin for antitrust error is narrow -- plan carefully★ Level of price protection activity dependent on maturity & perceived value
(equity) of brand○ Newer brands tend to be more involved but can’t sustain effort○ Premium brands pay attention to protecting their equity
★ Keeping an eye on potential antitrust violation line★ Using unilateral language to make a strong statement – Colgate Policy: You
can choose to not abide with our policies (i.e., sell for what you want) so long as you understand we reserve the right to sell or not sell to you
★ Using technology to assist in monitoring, consultants and/or employees to manage actual violations -- automated emails go mostly unnoticed but can serve as evidence to justify legal action if/when needed
★ Requiring active participation from channel (distributors & retail partners) to identify violators & manage violations
Current State of PPP -- Brands (continued)Advice for Brands -- Effective PPP1. Clear, Consistent & Uniform -- protect your Brand Identity2. PPP as integral part of business strategy -- clearly communicate with
partner & company-wide adoption3. Adopt feasible technologies that meet business objectives
a. frequency of crawl -- how oftenb. scope of crawl -- how many direct sitesc. reporting & violation management response timed. what happens when violation occurs
4. Review policies at regular intervals & make improvements5. Bring back the MAP love & treat as an incentive program -- incent Retailers
to adhere via co-op dollars, education programs, recognition, employee recognition, etc.
Current State of PPP -- Distributors★ Get in the game, if you are not!★ Use opportunity to partner with price monitoring services company &
provide VAS to brands -- new revenue stream★ Work with Brands to manage MAP programs
Current State of PPP -- Retailers★ Pressure will not go away★ Voice your concerns:
★ Competitiveness – what’s to ensure competitors will play by rules?
★ Wasting time & energy reporting violations – no tangible remedy…The Amazon Factor
★ By the time it happens, it’s too late – I shouldn’t have to police★ Decreased margins on left-over inventory & loss of profits★ Unilateral – being told what’s happening vs treated as an
involved partner
Your PPP & MAP>>How many of you have the following in place:
1. MAP Program2. Price Protection Policy (PPP)3. Inside council to manage PPP4. Outside council to manage PPP5. Outsourced price & channel monitoring
>>How many of you are satisfied with current programs?
Kam Zardouzian@KamZardouzianPrice & Channel
MonitoringPrice Protection Policy &
Minimum Advertised Price Strategy Consulting