PMS and price war: how to protect margins and relationships?

Did you know that when the PMS policy is neglected, the brand opens the door to a price war that erodes its real value in the market?

Studies They point out that more than 70% of buyers stop buying from a brand repeatedly 5 years after a break in their price positioning, which demonstrates not only the direct impact on volume and perceived value.

Do you want to understand how to apply PMS and shield your brand from the price war? Check out the full guide below!

What is PMS and why does it exist?

Suggested Minimum Price (PMS) is the reference value that a brand recommends for the resale of its products. It is not a legal imposition, it is a strategic orientation within the value chain to avoid the erosion of profit margins and the weakening of the product's image in the market.

Each product of the company usually has a specific PMS. The calculation normally considers a few elements:

• Cost of production or acquisition;
• Brand profit margin;
• Average margin of distributors and resellers;
• Average market prices and competitors' behavior;
• Marketplace taxes, shipping, and commissions.

The PMS works as a balancing tool between all the links in the chain: the brand protects its reputation, the distributors maintain healthy margins and the marketplace continues to offer a reliable ecosystem.

When does the price war start (and who loses with it)?

The price war begins when a single seller decides to reduce the price of a product just to gain visibility. The initial fall seems harmless, but it ignites the trigger of a devaluation cycle:

1. A seller lowers the price to increase visibility

The reduction occurs without coordination with the brand, generally to win the Buy Box or improve organic ranking within a marketplace. It's a discount that unbalances the channel's average price.

2. The other resellers react

In order not to lose competitiveness, other sellers replicate the new value, initiating an equalization process from below, the so-called Race to the Bottom.

3. Margins and value perception plummet

The operating margin of the entire chain decreases, while the product loses its symbolic value. What was previously perceived as a premium is now treated as a commodity.

4. The consumer wins in the short term

There is a momentary benefit in the final price, but this reduces investments in quality, logistics, and experience. The price gain turns into a loss of trust.

5. The brand loses authority and sustainability

With compressed margins and a devalued image, the brand now Compete only by price, compromising profitability and channel loyalty.

How does the price below the suggested price destroy relationships?

The product sold below the Suggested Minimum Price (PMS) generates a Cascade effect that compromises the relationship between brand and distributors:

1. Rupture of contracts

Loyal resellers feel undermined and may end exclusivity contracts or suspend orders. The relationship with the brand deteriorates rapidly, reducing market coverage.

2. Loss of trust

If the brand does not react or does not monitor PMS violations, partners start to doubt their ability to control. This weakens commitment to trade policies and discourages future negotiations.

3. Disorganization of the distribution channel

The absence of price standardization creates a chaotic scenario: unbalanced inventories, sales concentrated on a few sellers, and a drop in the perceived value of the product. The channel ceases to be predictable and becomes unsustainable.

How to implement and monitor PMS?

What every brand needs to transform the PMS into its main defense against the price war:

Establish a price list

Brands that miscommunicate their guidelines open space for different interpretations of what is “allowed”. The clarity of communication avoids breaches and reinforces that the PMS is not a limitation, but a pillar of commercial balance.

Check out how to implement a structured price list:

• Define the PMS based on cost, margin, and placement by SKU and channel;
• Create an official price list and distribute it to all partners;
• Include PMS in supply contracts and business policies;
• Hold periodic alignment meetings with distributors and resellers;
• Provide direct communication channels to answer questions about pricing.

Monitor prices in real time on the main marketplaces

An automatic discount or an unauthorized promotion can break the coherence of the entire chain. Continuous monitoring transforms the PMS from a theoretical rule into a market control tool.

Here's what to do to apply monitoring:

• Use price tracking platforms to track marketplaces, such as Amazon, Mercado Livre and Magazine Luiza;
• Set up automatic alerts to identify PMS violations;
• Generate comparative reports between PMS, average price and real minimum price;
• Prioritize the channels with the highest history of violations for analysis.

Reply to sellers that violate the PMS

Not every violation is intentional, but all require a response. Acting fast shows partners that the brand has control and authority over your pricing policy.

Check out the step by step to react strategically:

• Formally notify the seller with evidence record;
• Give a short deadline for correction and document the return;
• Apply locks or suspensions in the event of a repeat offence;
• Reorganize the channel, prioritizing retailers that maintain compliance;
• Record all actions to ensure history and transparency in audits.

Integrate PMS into the brand shielding strategy

Protecting price is protecting value, and PMS is a central part of Online brand protection. It works together to control advertisements, monitor sellers, and combat counterfeiting to establish a complete defense against image erosion and loss of authority.

Here's how to integrate PMS with brand shielding:

• Include the PMS in the system of Online brand protection monitoring;
• Use price data to cross paths with advertisements and identify positioning deviations;
• Create integrated price compliance and channel integrity reports;
• Monitor new and unauthorized sellers in real time.

The minimum price is essential to maintain consistent value and balanced margins, but true protection in the price war only occurs when the PMS is part of a complete online brand protection strategy.

Do you want to protect your brand in the digital market? Talk to a Brandd expertGo and discover how to prevent competitors from devaluing your product!

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