Case Detail

Case Summary

Sondologics: Product Diversion and MAP Violations in Internet Channels

Case Number: 5-416-753, Year Published: 2016

HBS Number: KEL977

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Authors: Anne Coughlan

Key Concepts

Consumer Marketing, Control Systems, Distribution, Distribution Channels, E-commerce, Marketing Strategy, Pricing Strategy, Product Management, Sales Strategy, Gray Marketing, Minimum Advertised Pricing, MAP

Abstract

Sondologics, a manufacturer of video, audio, and gaming accessories products, was experiencing pricing and distribution problems in its channels. Numerous retailers were complaining about unfair price competition from unauthorized retailers, i.e., gray marketers, on standalone websites or Amazon's Marketplace, offering discounts of up to 30% off list price.

The company estimated that about 10% of its retail volume in the United States was being generated by unauthorized retailers. Compounding the problem, gray marketers and authorized retailers alike were selling at below-list prices, which violated the Sondologics MAP (minimum advertised pricing) policy.

Sondologics was considering numerous initiatives to address the MAP and gray-market problems, including retaining a third-party service to monitor pricing and distribution in the channel. Students are asked to develop recommendations that would promote sales while protecting the name-brand image and price points of Sondologics' products.

Learning Objectives

After reading and analyzing the case, students will be able to: understand and explain the impact of gray marketing and MAP violations on various channel members; calculate the economic incentives for channel partners to engage in gray marketing; identify and classify channel constraints that lead to gray marketing; pinpoint sources of power and conflict in the channel system; and develop and justify recommendations to manage and mitigate gray marketing and MAP violations.

Number of Pages: 14

Extended Case Information

Teaching Areas: Marketing

Teaching Note Available: Yes

Geographic: United States

Industry: Audiovisual equipment

Organization Name: Fictional

Organization Department: Sales and marketing

Organization Size: Medium

Decision Maker Position: Vice president

Decision Maker Gender: Female

Year of Case: 2016