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What is MAP Pricing? Importance & Protection for Brands

By Priceva
on July 11, 2022
The e-commerce market is overflowing with competitors in almost every niche, and customers enjoy a wide selection of goods. How do they choose one product out of many? Price plays a key role in the majority of cases. Retailers try to optimize the price of products to make them more attractive for potential buyers.

That may lead to price wars between market players, which is not profitable either for the reseller or the manufacturer (all in all, underpriced goods can damage a brand’s reputation). To establish control over minimum prices, MAP pricing policies appeared in retail.

Read on to find out what MAP is, whether it helps or hinders competition, why brands need it, and how to efficiently monitor minimum advertised prices.

MAP Pricing Definition

MAP stands for Minimum Advertised Price, and is a pre-decided minimum price for a product that resellers agree to not advertise or sell below. For example, if an electronics brand has decided the Minimum Advertised Price for a particular cell phone model is $100, distributors and resellers, both online as well as in-store, are obligated to offer this product for $100 or above.

Note that, as its name suggests, MAP is the minimum cost that a retailer can advertise. This is not necessarily the price that can be offered in a store, just the lowest they can show online.

MAPs are set for almost every product. This pricing policy is practiced all around the world, despite not being legalized in some countries. Manufacturers and brands put a lot of effort into developing MAPs and monitoring the market for price violations.

What Is a MAP Pricing Policy?

A MAP policy is an agreement between a manufacturer or brand with resellers that the latter do not advertise a product below a certain price. Some MAP contracts do not even allow selling goods beyond a certain threshold. For example, if a homeware brand has decided that the minimum advertised price for a particular saucepan is $70, retailers and resellers cannot charge less than $70 for this item both in-store and in online shops.

When a MAP policy is violated, the manufacturer can penalize retailers according to the conditions in the contract. It can withhold product supply or simply terminate their partnership.

Every MAP policy is unique, and its guidelines should be carefully developed by manufacturers because retailers can find and exploit loopholes. For example, distributors can understand ‘advertising’ as off-site activity and advertise on-site at a lower price, which is not disallowed by the agreement.

Some brands have exceptions from their MAP policy rules: they can advertise a product cheaper for certain groups, such as veterans, military service members, etc. Massive sales during a low season or Black Fridays are also a legal way to sell goods below MAP.

IMAP Pricing vs. MAP Pricing

Initially, MAP was intended for controlling prices in brick-and-mortar stores, so this policy applies to offline advertising (billboards, commercials on TV and magazines, catalogues, and so on). IMAP stands for Internet Minimum Advertised Price and is used for retailers that sell products online: it highlights guidelines for e-commerce stores that advertise on the net. Generally, there is no difference between IMAP and MAP, except for where they are used.

MSRP vs. MAP Pricing

MSRP stands for Manufacturers’ Suggested Retail Price, and is commonly abbreviated as SRP or RRP. It reflects what the manufacturer believes their goods should sell for. While MAP applies to the promotion of goods and defines the lowest price, MSRP explains to retailers what the product’s normal cost should be.

These are two different pricing methods:
  • MSRP is not a strict rule — it does not oblige retailers, but rather informs them of the cost the brand expects their items to sell for. It is a guide for resellers who want to set optimal prices for their products.
  • MAP, on the contrary, is a must-follow policy for resellers. They cannot advertise a product below the pre-set price threshold.

Hence, MSRP provides retailers with a clear vision of how much they can charge to maintain an acceptable profit margin, while MAP is the minimal pricing requirement.

How Is MAP Pricing Calculated?

When figuring out a MAP, a brand should consider several factors:
  • The MAP price should not reduce the company’s profit margin.
  • The price should reflect the brand’s reputation and protect its equity.
  • The MAP policy should respect the retailers’ interests.

One approach to calculating the Minimum Advertised Price (MAP) is taking a 20% discount off the most current published Manufacturer Suggested Retail Price (MSRP) list.

Why Do Brands Need MAP Pricing?

So, why should manufacturers care about MAP? Because the retail market can become a shark pool with constant price wars between retailers, which puts brand image at risk and compromises profit growth. MAP pricing is the best way to prevent problems with undercutting, no matter how many sales channels you run.

Saving Brand Positioning

Without a MAP policy imposed, retailers can advertise goods at low prices to lure potential buyers, get web traffic or clear out their stock. This is a common practice on large marketplaces like Amazon. Some sellers can make a product too cheap in order to collect positive reviews, boost sales volume and win a position in the top-rated items list.

If that happens too often, it can reduce the product’s value in the eyes of customers and damage the brand’s reputation. That will inevitably lead to the loss of potential revenue. For this reason, manufacturers use MAP as a price control tool.

Better Protection for Retailers

Massive price wars are profitable for no one but buyers. If one reseller sets rock-bottom prices, others also start undercutting the cost in order to maintain competitive pricing and continue attracting buyers. This race may even result in a situation where a brand is no longer willing to stock the retailer’s store and terminates their contract.

With a MAP policy in place, brands retain control over prices and prevent the lasting impact of price wars. Over the long term, this solution supports trustworthy relationships between the brand/company and resellers because MAP policy requires both sides to meet the expectations. Retailers maintain agreeable prices, while manufacturers update the requirements according to the product’s current relevance and demand.

More Sales Channels

When the margins of third-party resellers are protected, manufacturers can witness an increase in the number of sellers that stock their goods. A MAP policy serves as a guarantee of fair play on the market. Thus, even minor companies and well-established retailers can stock a brand’s products, resting assured that they will be able to advertise them for a competitive price.

Your loyal, trustworthy resellers will appreciate that you have a MAP policy because it allows them to stay competitive even against large retailers. With a MAP, your prices are not ‘suggested’ but rather enforced — resellers have no choice but to charge reasonably.

The sense of security established by MAP pricing can draw more sellers to your retail network. Hence, it can be a part of an omnichannel strategy. However, you should remember to renew your MAP policies for each new generation of the product so that resellers won’t struggle to sell old stock.

Accurate Performance Analysis

When all retailers keep the cost within a certain range, brands can focus on analyzing product performance and its value for consumers. Without huge discounts driving sales, brands can clearly see which goods are more popular and why. That means they give a deep insight into consumer behavior, efficiency of advertisements, market conditions, and so on.

This information allows brands and manufacturers to make efficient business decisions, build strategic partnerships, and continue promoting in-demand products.

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Pros of MAP Pricing

Here are the major reasons to implement MAP pricing:
  1. It allows manufacturers and brands to maintain a good reputation through product price perception. Too cheap goods seem to be of low quality to buyers, so price wars can damage the brand’s image in their eyes. It is important to set the cost that a manufacturer believes their products deserve.
  2. MAP applies to advertising, not sales. These policies are not intended to affect the final price — it is up to the retailer to sell the product with a large discount. MAPs focus on the advertised price instead, so they do not hinder sales volume.
  3. MAP policies force retailers to abide by the rules — that makes it possible to set the market standard in terms of price expectations.
  4. MAPs protect reseller margins by providing an optimal floor price for a product. Although it might affect competition, this minimum requirement prevents price wars and a race to the bottom.

Cons of MAP Pricing

MAPs have a few disadvantages for market participants:
  1. They limit retailers’ control over prices. Sellers do not have an opportunity to create unique advertising and marketing strategies.
  2. MAPs restrict market competition by causing fewer price fluctuations. That makes differentiation and positioning more challenging for resellers.
  3. More paperwork is involved. Mostly practiced in the United States, a MAP policy adds more administrative workload, especially when American brands want to operate internationally.

Is MAP Pricing Legal?

On the one hand, a MAP is based on price fixing, which is completely at odds with the laws of a free competitive market. On the other hand, usually it has no legal requirement for what price particular retailers should sell products at. Instead, it describes guidelines for advertising in order to save the brand’s reputation and avoid competition between marketplaces and web stores.

In the United States, MAPs are absolutely legal under U.S. antitrust laws that were introduced as long ago as in 1919! In the European Union, MAPs are not allowed, so brands resort to another legalized practice — manufacturer’s suggested retail price (MSRP).

Penalties for Advertising Below MAP

It’s up to manufacturers to decide how to penalize for MAP violation: they have a legal right to confiscate their supplies from the reseller’s store and prohibit selling the products. However, this is a last-ditch measure for repeat violators. As a rule, brands send warnings and fine retailers.

Reasons MAP Pricing Must Be Monitored

Here are the reasons to introduce MAP policies and constantly monitor retailers’ offers:
  • The age of marketplaces. Without monitoring MAP pricing, your brand’s products are doomed to be involved in price wars.
  • High competitiveness. With a MAP policy enforced, retailers have no choice but to refine seller rating, advertisement strategies — everything that directly impacts buying decisions.
  • Limited control over individual retailers. With dozens or hundreds of retailers across multiple marketplaces and channels, it’s impossible to rest assured that your policy is being followed without implementing an efficient MAP monitoring solution.
  • Brand image management. By maintaining prices within a normal range, you rest assured that customers perceive your products as quality ones and the reputation of your company is good enough.

How to Enforce MAP Pricing

The first thing you should do is leverage MAP pricing monitoring. How do you know that retailers aren’t violating the MAP? To start with, you should set the MAP. Then, consider tracking retailers’ quotes with pricing intelligence, for example, using MAP monitoring software from Priceva. It automates data collection, scans prices for all your products across different retailers’ stores, and notifies you in case of MAP violation.

Automation of price monitoring is a must in the e-commerce industry, but what to do next when you discover MAP violators? Do not neglect these occasions and take measures immediately!

You can start with sending a retailer a warning and ask to restore the normal price level. Also, brands can withhold product supply for some time or exclude resellers from future promotional deals. Termination of partnership is a rare event and might be used when a retailer has repeatedly violated MAP policies.

As a rule, temporary supply limitations and similar penalties are enough to show that you are serious about your MAP policies and keep retailers in line. In a more disciplined market, retailers are likely to report price violations to suppliers because they don’t want unfair competitors to lure the majority of buyers by offering the lowest cost.

Conclusion

MAP policies are arguably efficient for brands and manufacturers to control prices and perception of product value. At the same time, they restrict the freedom that retailers need for healthy competition.

The choice is up to you, but if you operate in the United States or other countries that allow this policy, using MAP is highly recommended. It can prevent retailers on marketplaces and web stores from underpricing your goods and waging price wars.

FAQ

Are MSRP and MAP the same thing?

No, MAP is the minimum advertised price, which means retailers cannot advertise a lower cost or sell items below this pricing threshold. MSRP is the manufacturer's suggested retail price: this is a guideline on the average cost at which retailers are expected to sell the product. While MAP pricing policies are legal and can be enforced, MSRP is more a recommendation than a rule.

Is MAP the same as the retail price?

MAP describes the minimum price that can be advertised, but real retail prices are usually different. Retailers can introduce large discounts when they want to get rid of old stock, or, vice versa, charge more when the product is in high demand.

Can You Sell Below MAP Pricing?

Theoretically, you can, because MAP policies mostly apply to advertised pricing. However, some brands and manufacturers can regard constant underpricing as a violation.

Can You Sell Above MAP Pricing?

Yes, it is not disallowed by MAP policies. Higher prices increase retailers’ profit margin and can increase the product’s perceived value.

What Does MAP Stand for in Purchasing?

MAP stands for “minimum advertised price,” and a MAP policy is a legal agreement that manufacturers use to set the lowest price possible at which goods can be advertised for.

What is a MAP Pricing Violation?

Violations occur when retailers advertise a product for a cheaper price than stated in the MAP policy. For example, they may inform potential buyers that the product is sold for $7.99 when the minimum advertised pricing policy calls for $9.99.
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