Question

Describe the arguments in favor of resale price maintenance and the criticisms of these arguments.

Answer 1

Improved Consumer and Brand Goodwill: The most significant benefit gained from this approach is that it preserves the manufacturer's interest and strengthens the concern and the product's goodwill. It sets up and retains a permanent brand market.

Avoiding the use of Loss Leaders: the protection of resale prices gives another benefit to avoid the selling of Toss leader. A supplier offers the products to customers even below its expense under loss leader pricing, in order to attract the consumer for other items. In following this strategy, once a vendor wins over a buyer, a lifelong customer is generated that can be targeted by the seller in the future. The loss on the selling of leading loss items is offset by the seller's gain on other items. By using the resale price management strategy to prevent indiscriminate pricing, these activities can be tested.

Removal of Competition: This minimizes the existence of competition among different dealers as the price of the products under this policy is uniform. This strategy preserves their rights and allows small and large wholesalers and distributors to co-exist side by side.

Set and Standard Margin: This strategy guarantees that investment margins are set and standard. Profits are growing and providing the dealers with a sound financial base. Plugging back or self-financing will greatly improve their performance.