If you are a manufacturer or brand owner, having a say in the selling price of your product is extremely important in order to maintain profit margins. Since customers typically price-compare before buying, the ability to suggest a minimum advertised price (MAP) is a valuable tool to prevent increased customer’s expectation of a cheap product. MAP policies have legal implications, however. In order to comply with antitrust laws at the state and federal level, manufacturers must take care of the implementation and enforcement of MAP policies.
What is MAP? Is it a type of price fixing? Who benefits from it, only brand owners or retailers or customers too? There are so many questions you might ask about it and in this post, we are going to explain them in the hope that you can navigate your pricing strategy for your Amazon business.
What is Minimum Advertised Price?
Minimum Advertised Pricing is the best practice for manufacturers looking to maintain their profit margins and brands. In short, Minimum Advertised Price is the lowest price set by a brand owner or a manufacturer that a reseller is allowed to advertise the product for. This doesn’t dictate the final price, only what they can show on the website, ads, etc. MAP gets mixed up with price fixing and Manufacturer’s Suggested Retail Price, but it’s not the same.
Price fixing is when competitors agree to sell or buy a product only for a fixed price, usually a higher one. It’s illegal because customers aren’t given a fair price which is based on supply and demand. They do it to reduce the rivalry between themselves. One more problem regarding the price fixing is that it’s very hard to determine if the price change was caused by price fixing or a grounded reason.
On the other hand, Manufacturer’s Suggested Retail Price (MSRP) is a price that the manufacturers believe that the products should be sold for. It has nothing to do with lowering the competition. Manufacturers calculate the production costs and different margins, take the demand and supply into consideration and then decide on the price (each for themselves). That is the price the resellers should be selling for. So, retailers shouldn’t be advertising below MAP and selling under MSRP, but those prices don’t have to match.
Who Benefits From The MAP?
Well, there are benefits for brands/manufacturers, retailers and customers. Basically, everybody.
- Preserve the premium nature of their brand;
- Identify and eliminate unauthorized sellers (i.e., over distribution);
- Provide consistent pricing across all sellers (eliminate perceived commoditization);
- Sell more because their good partners stock more.
- Protects margin so the product can be properly advertised and supported;
- Stocks more knowing they can be competitive on service versus only on price;
- Eliminates unauthorized sellers so legitimate retailers can sell more.
- Enables buyers to find genuine, non-counterfeit products easily;
- Purchases from an authorized seller who provides warranty and ‘after sale’ support;
- Learns to trust and drive loyalty to a brand.
How Can Brand Owners/ Manufacturers Force Brands?
MAP monitoring can be used to procure all the evidence needed to ensure that the brands are complying with the MAP pricing policies in place. Here is how it can help ensure that all the brands are following the MAP set.
- Evidence can be collected to prove the MAP price violations from those set in place. Any screenshots or solid proof will suffice as proof.
- The collected evidence can be used to show to the manufacturers and make the others compliant. This proof can be collected by both retailers and manufacturers.
- The pricing can be renegotiated to ensure that all brands are on the same page and agree to the MAP.
- The MAP monitoring is a great way to follow up and keep a check on the selling price.
- The MAP monitoring will give you all the information about MAP price violations made. It can track and show the details you need to use as evidence.
- If there were MAP pricing policies signed, the manufacturers are liable to take legal action against the brands. They can even choose to terminate their listings. Retailers are also liable to follow the set MAP. If they don’t comply even after a warning, then legal action can be taken.
If your organization has not set up a MAP policy, you can learn how to establish a MAP policy here.
Overall, it may be said that having a MAP policy is more important than ever. It’s key to keeping your company out of an ugly price war and protect against brand erosion.
But for your MAP policy to have any real effect, you must enforce it. Establishing a list of best practices is an effective first step, and should help streamline the process. In turn, you can establish a level of homogeneity across all of your resellers, maximize your profitability, and preserve your brand. This will prevent the dreaded pricing wars between manufacturers and retailers.
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