Clockwise from top left: Chris Gardner, senior vice president of the Automotive Aftermarket Suppliers Association; Cary Redman, vice president of sales for Edelbrock (performance industry); Dan Jasnow, attorney at the law firm Arent Fox; Paul McCarthy, president and COO of the Automotive Aftermarket Suppliers Association; Rich Barsamian, vice president of sales and marketing for Advanced Clutch Technology; Jon Rubich, president and owner of Insights 2 Action, sponsor of the MAP Virtual Summit; David Wilbanks, senior vice president of merchandise for O’Reilly Auto Parts; and Debbie Hodson, strategic marketing director for ITW Car Care, part of ITW Global Brands
By Allan Janssen
Price controls are “all the buzz” in the aftermarket these days, says Paul McCarthy, president and COO of the Automotive Aftermarket Suppliers Association (AASA).
His association recently held a virtual summit on the topic, with a bevy of experts to discuss why pricing policies might be the solution to a margin-challenged supply chain.
“Minimum advertised price – also known as MAP – has certainly been the talk at recent vendor summits. It’s been part of the buzz at AAPEX,” he said in his introduction. “We see many customers asking suppliers to consider MAP policies, as our industry adjusts to the new omni-channel reality.”
The interest has even led to the creation of an online resource where suppliers and distributors can learn the basics of what it entails, how to implement it, and how to avoid common pitfalls.
The experts invited to share their views on the topic during a MAP Virtual Summit webinar last week, said pricing policies offer great benefits, provided certain guidelines are followed. Among them:
Work out the details ahead of time
Debbie Hodson, strategic marketing director for ITW Car Care, part of ITW Global Brands, said minimum advertised pricing has been very helpful in a number of categories she oversees, including premium wiper blades.
“The main reason was that we needed to protect our brand equity,” she said. “We not only invest in R&D and innovation, but also in programs for our retailers, and programs for consumers, and we spend pretty heavily in advertising as well.”
She said a minimum advertised price allowed ITW Car Care to provide channel partners with room to offer an appropriate level of service to their customers. And because such a policy created some administrative demands, her goal was “over-communicate” early in the process and then make very few updates.
“We wanted to get all the information out there upfront, and make it very clear, providing FAQs, and then try to limit the number of updates to our policy, because each update could potentially cause confusion and new questions,” she said.
Cary Redman, vice president of sales for performance product company Edelbrock, said a lot of his customers appreciated having a generous lead time to get used to the idea, learn how it works, and plan promotions that would meet the new guidelines.
“When we implemented in 2015, we’d been working on the policy a year ahead of time,” he said. “We used that time to educate the customer, and give them lead time for printed materials.”
Enforcement is key
The danger, however, is not following through with policing the policy, he said.
“A lot of manufacturers have come up with a pricing policy but they don’t enforce it,” Redman said. “That causes confusion, animosity, and headaches.”
In fact, Edelbrock has embraced a unilateral price policy (UPP), which goes a little further than MAP. Rather than just policing the advertised price, UPP dictates the minimum ‘cart’ or check-out price.
“We decided to go that extra step to really protect our brand. It was a brand that was very margin-challenged, had an immense amount of equity in the industry,” he said.
And he said Edelbrock has been extremely committed to making the policy work by enforcing it carefully and fairly.
“We had a customer that wanted to test the policy at the beginning,” he said. “There’s always someone who will test it. We really put our foot down and agreed as a management team and as a company that we were going to make a statement.”
Rigid enforcement is made palatable by the fact that it applies to everyone down the supply chain, said Hodson. “Whether you’re our number one customer, or our number 30 customer, we’re treating everyone the same,” she said.
Stick to your guns
“If you’re going to do this, you have to commit to it,” said Rich Barsamian, vice president of sales and marketing for Advanced Clutch Technology (ACT).
He has presented on pricing policies every year at the Specialty Equipment Manufacturers Association show (SEMA) since 2013.
“When we first started, we were really pioneering it because most people didn’t believe we were going to follow the policy,” he said. “And, yes, in the beginning we did have to cut off some big customers to show them that we meant business. But we weathered that storm, and by doing that we gained the respect of the industry.”
‘Here’s the policy. It’s your choice as to whether you want to be subject to it, but it is our choice, as a manufacturer, to say that our product will not be devalued in the marketplace.’
He said enforcing the policy was sometimes difficult.
“I knew I was taking food off my own table,” he said, “but I saw the greater good and I knew the payoff would eventually be there. And it was there.”
Barsamian said ACT, which uses a version of UPP which dictates both a minimum retail resell price and a minimum wholesale resell price, became a brand that customers trusted to help them make their margins, allowing them to service their customers the way they wanted to.
“We had to say, ‘Here’s the policy. It’s your choice as to whether you want to be subject to it, but it is our choice, as a manufacturer, to say that our product will not be devalued in the marketplace,’” he said. “We spend millions to bring our products to life. And we want to make sure that we can continue to be in business, and people respect our product line.”
Redman agrees. “We had to stick to our guns,” he said. “You have to come to grips with the fact that if you have to turn off your biggest customer, you need to be able to do that.”
Consider third-parties for monitoring and enforcement
Lopsided monitoring and enforcement will cause ill will in the marketplace, all the panelists agreed. They argued in favour of impartial administration of pricing policies, which could be handled by third party service providers.
Hiring another company takes the responsibility and the angry responses away, they said. Or at the very least, have dedicated staff to do the monitoring and enforcing.
“Don’t let your sales people, or your customer service team field these kinds of calls,”Barsamian suggested. “We do everything in house still, but it’s only one person who speaks to violations.”
Redman agreed that it is not a job for sales people. “We don’t want our customer service people or sales team to be the police on this,” he said. “We want them out there selling parts, and we need them to have solid relationships with our customers.”
Work with the customer
From a customer perspective, David Wilbanks, senior vice president of merchandise for O’Reilly Auto Parts said pricing policies are helpful to retain the value of aftermarket brands.
“They ensure that the value-add services that we bring to the market can be preserved,” he said.
He said the aftermarket still relies on brick-and-mortar stores where people can touch and feel the parts, and find selection and installation advice.
“That all comes at a cost and it also comes with a lot of value for our suppliers,” he said. “There are investments that we make. [A pricing policy] doesn’t allow those who don’t or won’t make those investments to sell strictly on price, and thereby devalue the brand in the market, make it tough for everyone, and create channel conflicts.”
Hodson said channel conflict might arise briefly when a policy is introduced, but with education, patience, and a commitment to fair dealing, it will get resolved.
“We’ve been very fortunate that, other than maybe the first three or four months, our customers have been thankful and grateful that we have this policy,” she said.
Also on the call were Dan Jasnow, an attorney with the law firm Arent Fox, who offered definitions, examples, and best practices on establishing a minimum advertised price policy, and Jon Rubich, president and owner of Insights 2 Action, the sponsor of the event.