Techniques for Controlling Gray Market Violations Gray markets have emerged as a major problem in the current business world. For supply chains and for brand owners alike, the growing incidence of gray markets comes forth as a major issue which dilutes a brands' presence, damages the relationship among distribution partners, raises concerns regarding a company's reputation, induces channel conflicts and eventually leads to legal liabilities. Gray markets are hard to control given the highly distributed data regarding such activities. A number of companies have established strict standards which call for severe punishments of such operators. However, this solution alone is highly ineffective. Following are some utile techniques to control gray markets:
Develop Proficiencies to Sense Gray Market Violations and Their Extent The problem with gray markets is that techniques which uncover these sales are highly underdeveloped. The best way to detect gray market violations is to make use of periodic but unannounced audits of distribution partners and their relevant records. Other than this, a more cost effective method is to establish toll-free numbers which can be used by authorized dealers for reporting such activities. Contracting with market research firms is to gain an estimate of the overall extent of gray market violations of specific products and services is also a useful suggestion. Given the wide knowledge base and industry expertise of these firms, they have a greater understanding of the market operations. High-tech solutions may also be used to track the products through different distribution channels. Sophisticated tracking software, Web crawlers which compare different URLs of authorized dealers in order to detect traces of unauthorized sales, inert and traceable substances in products and RFID are some recommendations for sensing these violations.
Apply Fast Actions The more efficient and responsive a firm is in enforcing its actions in the gray market; the easier it will be to control them. Firstly, high responsiveness results in a cause and effect relation between the gray market sales and their consequences. Secondly, a speedy reaction implies that the participator will have much less time to reap the benefits associated with gray market payoffs. A speedy response is only possible through the creation of efficient company processes and structures. This can be ensured by developing internal processes and by empowering specific managers to take relevant actions. Such a structure calls for a clear chain of command. While certain organizations are now creating specific managerial positions to deal with gray markets, there are others that rely on training programs so as to promote further understanding companywide and to develop accepted metrics to reach unanimous solutions. Companies can also establish dedicated audit teams which work independently from marketing and sales groups to identify unusual or foreign sale patterns. Lastly, "actions" imply that the company is able to implement the most appropriate degree of punishments for gray market participants. Charge backs or fines are one of the most common ways to deter such dealers. In order to maintain strict control over distribution partners and their abidance to the company policies, some firms also withhold certain rewards, withdraw allowances or sometimes lessen the same in terms of reduced discounts.
References: http://www.researchomatic.com/the-Impact-Of-Grey-Markets-On-TheInternational-Market-Pricing-Decision-77502.html