Question

Topic: Customer Behavior

Potential Impact Of Minimum Pricing Laws

Posted by Anonymous on 9/25/2007 at 1:08 PM ET 250 Points
Hello!

As most people are probably aware, on June 28, the U.S. Supreme Court overturned a nearly century old anti-trust precedent that may permit manufacturers to set minumim pricing for their product.

I handle the sales and marketing for a small (but growing!) decorative hardware manufacturer and we are currently considering the idea of setting a minimum price policy to our dealers.

Our reasoning is this: The company is positioned as a medium to high end manufacturer of decorative hardware. In this industry several of our competitors compete on a low cost basis, however there are a few who focus mainly on selling product in only high end showrooms. As far as I am aware, if we set a minimum price policy for our showroom dealers, we would be the first to do so amoung our competition. In an article published in a leading industry magazine, the author makes a couple good arguments for implementing a min. pricing policy:

1. Dealers who invest in thier showrooms, staff training, and high quality merchandise will look to form stronger partnerships with mfg.'s who are willing to implement this policy.

2. The high-end showrooms often have a mentality such that they wonder "why give floor space to a product line that continues to be sold cheaply." ---> The goal at our company is to put forth an image of high quality so this goes hand in hand with what we are striving to do with our image.

At this stage our company is still working on building awareness and brand recognition, as well as growing our market share, so it is imperative that we make the proper decision here.

My question is this: What is the best way to introduce this policy to our existing dealers. Currently we are planning to start by administering a email survey simply to find out how our dealers feel about it. Does anyone have good ideas about the type of questions we should ask or how to go about implemeting the policy altogether?

THANK YOU!!!!
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RESPONSES

  • Posted on 9/25/2007 at 11:27 PM Accepted
    There are a lot of good thoughts on this subject. Perhaps the most important one is that this can be touchy for the channel. I wouldn't even send a document. I would talk to the key players in a spirit of collaborative exploration. The only way it will work is with their support, and the way to get their support is to involve them in the process.
  • Posted on 9/28/2007 at 10:41 AM Member
    Lot's of very good suggestions, here is mine .Pl. try it out with a few selected distributors first.This will ensure that you can fine tune before a full scale launch .May be this could lead to specific offers for different segments of your customers.
  • Posted on 10/1/2007 at 11:58 AM Accepted
    As the owner of a mid-high end boutique, I love it when manufacturers set minimum prices. This is a very common practice amounst manufacturers trying to protect the value of their line. Of course, if you don't have a quality product it really doesn't matter I WON'T deal with a manufacturer that lets their product be discounted all over the internet. It is BAD for my business if your widget is $10 in my store & $2 on line. Customers are savvy and they look on line. People can be really tacky too, there is a whole movement towards being the price police, if they found it cheaper on line they will loudly announce it in the store. I've had it happen to me and I've seen it happen at Macys & other stores. I also look for companies that have Ebay policies, because I don't feel like justifying to customers why I can't sell it for $2 like the Ebayer they just found. If your product appears to be discounted via the internet & its in my store, then all of a sudden everything in my stores takes on a different feel in the mind of the customer. Your product is of more value if it is of more value. The other thing that all of the companies I deal that have a minimum price do is market their products so that I get some great leads both from their marketing and their website. I think if you want to be a premium product you have to make sure you don't have a discounted price. The strong merchants understand the price policy protects them and they will sell more. The stores that need to discount are probably not stores you need or want your product in. You might sell a little less in the beginning, but the stores that you do well with will be more loyal as you are protecting their ability to make a profit and in the long run I believe you will do better. Most companies just send out a notice to existing customers and then have all new customers sign a policy sheet when they become a vendor. It's not that hard, merchants are really used to this.
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