Well, we’ve all run into now—inflation. It’s no longer a “overseas” problem or a “logistical backlog.” It’s hitting our proverbial pocketbooks and taking a toll on our household budgets.
The price tag on nearly every consumer item is on the rise. This past weekend, I went to my usual hometown breakfast joint for my usual pancakes & eggs platter—not only had the price jumped 25 percent (from $8 to $10) since the previous week, but the toast was no longer included! That’s when I knew this was for real.
Ok, so what does my breakfast meal dilemma have to do with your brand protection efforts concerning pricing? Inflation. It’s all related. Allow me to explain:
There are essentially two different ways in which this broad, dramatic inflation episode affects your attempts to keep your brand’s pricing level and competitive.
Short-Term Wiggle Room
The immediate (and probably more obvious) effect of inflation on your brand pricing creation of “wiggle room.” What I mean by that is your brand has product distributed out to tens, hundreds, maybe thousands of retailers who all order different items in different quantities and at different times.
As your costs have increased and you have had to raise wholesale prices to your retail partners, those retailers are receiving and turning over your products to consumers at a plethora of varying price points. This is creating the aforementioned wiggle room for not only your known, approved sellers to unnecessarily increase or decrease prices (as applicable) to win sales or gain margin but also for grey market sellers to do the same. The result could be frayed pricing that causes consumer confusion, retailer frustration, and general brand deterioration.
Long-Term Sustainability
A more long-term takeaway from this inflation explosion is the absolute need for your brand to implement and enforce a minimum advertised price (MAP) policy. Just as a bit of context, keep in mind that haphazardly creating a MAP policy is not what I mean here—remember that a MAP policy is only enforceable with your brands authorized resellers because of the contractual business relationship you would have in place with those retailers. In contrast, it is basically fire kindling to all other resellers/retailers who are not part of your reseller program/authorized. You have no pricing enforcement power over unauthorized resellers (I would be happy to get on a call with you to discuss this in more detail, but, for the sake of this article, trust me).
Take this a step further and you also see the need for a legitimate reseller program to create your group of authorized resellers. But back to the issue at hand: Inflation highlighting the need for a MAP policy. As your costs of labor, manufacturing, shipping, etc. increase, naturally so to do your wholesale prices to retailers.
While the assumption would be that all retailers/resellers will undoubtedly push up their retail price on the items, this may not always be the case. It particularly will not be the case that they all do it in unison. Without any enforceable price policy—or with just an MSRP in place—you leave your brand open to the strong likelihood that some portion of the resellers our there (authorized or otherwise) will take the slight margin hit to win the BuyBox and keep prices low or lower than other resellers.
Brand Protection in a Time of Inflation
It’s funny, in a way, how the entire brand protection architecture is connected. These pieces I’ve touched on this article focus on pricing. But, even as you just read briefly about the long-term sustainability, getting things set for proper pricing efforts is dependent on an even more fundamental foundation for your sales channels, the reseller program.
At Blue Wheel, we are always happy to get on a call and discuss your brand protection needs or simply answer any questions you may have. Reach out if you have questions or to learn more about this topic.
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