Have you ever wondered why the price of a certain product stays consistent across different retailers? Well, this is where MAP pricing comes into the picture.
Highlights
- Minimum Advertised Price aka MAP refers to the threshold price retailers can use to promote their products.
- Need for MAP pricing strategies, when retail purchases are expected to grow 23% by 2027.
- Unreasonably discounted prices can hurt retailers, manufacturers, and consumers alike.
- Manufacturer’s suggested retail price vs. minimum retail price.
- Amazon doesn’t enforce MAP pricing but you can file Intellectual Property complaints against Amazon in case of MAP violation.
Purpose of this Blog
This blog will allow retailers to understand the nuances of MAP pricing. Amazon itself doesn’t have any threshold pricing policies. However, it strictly follows the brand’s MAP policies to ensure a fairly competitive and productive marketplace. MAP price policies ensure that retailers don’t take advantage of consumers and manufacturers.
Thus, creating a MAP policy is the ultimate way to present an even ground for retailers to boost their sales margin without affecting the brand’s product value.
In this blog, we will use brand and manufacturer as synonyms. Anyway, let’s delve into the intricacies of MAP pricing.
What is MAP Pricing?
When you ask what is MAP pricing? The simple answer is the minimum advertised price that the brand sets for its product. In essence, MAP pricing tells retailers the minimum price at which they can advertise their products. Although, retailers have the freedom to sell or resell the product at whatever price they want they can’t advertise or sell at a price lower than the MAP price.
If you ask what is map pricing in retail? Then it is nothing but a principle of brand-retailer-consumer harmony. If the retailer's price is lower than the price offered by the brand, it will devalue the product in the long run. On the retailer’s end, this affects their working relationship with the brand. While this brand and retailer drama continues, it will create confusion for the customers and affect sales.
Thus, brands create MAP policies that are distributed among retailers. They determine the consequences of not following these policies. Mostly, they hire companies to monitor the adherence to their brand’s policies.
Legal Nature and Significance of MAP Pricing
As per federal antitrust law MAP policies are legal in the US. They restrict the sellers/retailers from selling products for less than the final price set by the brand. However, for Europe and Australia, it is just an infringement of competition laws.
With a rapidly increasing trend toward online shopping and an expected 22.6% increase in retail purchases in coming years, the need for effective MAP pricing policies can’t be denied. In the highly competitive online market with a great profit potential, more and more sellers are entering the pool. However, this simultaneously creates business opportunities and concerns for brands.
To deal with such concerns, MAP pricing helps in 3 major ways:
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Sustain the Brand Value
When a retailer sells the product at an unreasonably low price, other retailers are forced to sell the product at low prices creating a price conflict with the brand. This dip in price reduces the profit margin for the brand, which means they start compromising the quality. This quality reduction affects the customer’s perception of the product thus reducing the brand value.
However, MAP pricing protocols allow consistent prices for retailers, consumers, and manufacturers, allowing the brand to produce quality products and sustain its brand value.
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Support Retailers Across Sales Medium
To gain a competitive advantage many retailers decrease their profit margin, which affects the other retailers. This MAP violation affects the other retailers. With pre-set policies, this can be avoided, and provide a fair playground for all the retailers across various sales channels.
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Consistent Quality and Pricing
With consistent profit margins, the brands don’t have reason to decrease the quality of their products. This quality assurance helps retailers maintain their happy consumer base which enhances the demand and creates more profit for retailers and manufacturers. With consistent quality and demand, the price also stays constant keeping the consumers satisfied.
MSRP vs MRP
MSRP is the acronym of the manufacturer’s suggested retail price. It is the random selling price that manufacturers set for the retailers to follow. This price fulfills two purposes;
- Perception of value
- Profit potential for retailers
On the other hand, MRP is the minimum retail price. Compared to MAP which is a minimum advertising price, MRP binds the retailers to not sell the product below the set MRP. Simply put, MAP would be the listing price while MRP would be the checkout price.
These two acronyms are important when we see what is map pricing policy in detail. Both MSRP and MRP help the brand determine the final map price for their particular product and streamline the brand’s value consistency.
Mind that, the map price is not set for all the products. Brands set the map price only for newly launched and their most sought-after products.
MAP Pricing and Amazon
Amazon itself doesn’t have such price control requirements but that doesn’t mean brands are powerless on Amazon. If a certain brand finds its map price violation it can reach out to Amazon and file a complaint. Against this complaint, Amazon warns the retailer that if the retailer continues the offense, its listing will be removed.
Conclusion
MAP policy allows the manufacturers to have a strong command over their product’s price and profitability. It allows the brand to have a consistent brand value without compromising the transaction harmony among retailers, suppliers, and consumers. All e-commerce sites including Amazon ensure that the brand integrity and product quality stay consistent with the help of MAP and many other policies.
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FAQ
What is Map Pricing?
It’s a pricing policy set by manufacturers and suppliers for the retailers. It is a minimum price at which retailers can advertise their products.