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The expansion of the online eCommerce world has made the consumer market more ruthless than ever. With brands fighting to get the customer’s attention, dynamic pricing has now become the key to gaining a competitive advantage.
Understanding the difference between MAP and MSRP pricing is crucial for setting the right prices for your products, protecting profit margins, and maintaining your brand value.
In this article, we’ll discuss:
Minimum Advertised Price or MAP is the lowest price at which a retailer can advertise a particular product. Set by the manufacturer, MAP pricing helps protect the brand’s value and profits by ensuring that the products cannot be priced below a pre-decided amount.
For instance, let’s say your brand sells sneakers and you set the MAP pricing for one of the sneakers at $99. That means, no retailers can advertise that pair of sneakers below the $99, online or in-store.
If a reseller tries to advertise your brand’s product at higher discounts and go below the MAP pricing, they would be in direct violation of your company’s MAP policies and you will be able to take strict action against them.
Setting your product’s MAP pricing can be a rather challenging task as you need to take into account the interest of numerous groups including brick and mortar retailers, online retailers, distributors (if you have any), and target customers.
There is no set formula or a magic number for coming up with a MAP price since the pricing will differ for each brand depending on their industry, niche, and market position.
Here are some of the factors that you should consider when calculating the MAP pricing:
No, you cannot.
The whole idea behind setting up MAP policies is to ensure sellers and retailers do not sell below the brand’s set MAP prices. If a retailer does end up advertising a product below its MAP price, the brand or the manufacturers have the legal right to take strict actions against the retailer and even revoke their authorized seller status.
Yes, in the United States MAP policies are legal as they fall under the Federal Antitrust Law. Though there can be some variation in different states.
It is also important to note that in the EU and UK, minimum pricing is not legal as it is seen as an infringement of the current competition laws of the region.
While it is not necessary for every manufacturer to use MAP prices, it’s usually recommended for manufacturers to set up MAP prices to protect their brand value and margins.
A MAP policy for brands also helps ensure that there is a complete even playing field for all retailers – big and small. That way, retailers aren’t constantly in a price war with each other to make sales which would only lead to your brand’s products getting devalued.
Some of the many benefits for setting MAP pricing include:
The Manufacturer’s Suggested Retail Price or MSRP is the sale price for products which is recommended by the manufacturer to the sellers. Also known as the list price or the sticker, it is designed to keep prices at almost the same level even in different stores.
But it’s important to note that retailers may not always use the MSRP and customers may not always pay the MSRP when buying your products.
As its name suggests, MSRP is a ‘suggested’ price that the manufacturers or the brands provide. It helps sellers decide on the right selling price for products and it helps customers determine whether they are paying the right price for the products or not. But there is no compulsion on sellers to charge the MSRP only.
Sellers may reduce the prices below MSRP when they are trying to move inventory off the shelves or trying to attract more customers during a sale season. Similarly, sellers may set the prices higher than MSRP when a product is popular and flying off the shelves quickly.
MSRP and MAP are two different types of product pricing.
While MAP prices only consider the lowest price at which the product can be advertised, MSRP is the selling price recommended by brands.
Sellers are expected to comply with the MAP policies. Advertising products lower than the MAP can be considered a breach of contract and even instigate a legal action by the brand.
On the other hand, MSRP is only a suggested price by brands, and sellers are not expected to follow it. MSRP tells sellers the price the brand expects them to sell its products at. MSRP is like a sign that helps sellers offer the right pricing to their customers.
MAP pricing actually protects the MSRP pricing. For instance, if you are trying to create a premium brand known for its high-quality products, you wouldn’t want your products to be advertised at deep discounts. It can send a message to your target customers that your products are not worth the MSRP at all.
While MAP is the minimum threshold for product pricing, MSRP gives retailers a good estimate of how much they can price the products realistically to maintain optimum profit margins.
Since MAP pricing is an agreement between the manufacturer and seller, it’s got nothing to do with Amazon and the eCommerce platform doesn’t care about it at all. It’s up to the brands to constantly monitor sellers on Amazon, enforce MAP pricing, and actively detect MAP violators.
Automated price tracking and enforcement is a solid way to handle MAP violations before they become a huge problem for your brand.
Red Points Seller Tracking offers a full range of features to protect your brand from MAP violations on Amazon. The software can automatically detect MAP non-compliance and notify sellers to address the same on priority. Its dedicated compliance dashboard also gives you full visibility into how all your different products are being sold online by different sellers.
Setting the right MAP and MSRP pricing doesn’t just mean stabilized profit margins and improved brand reputation, but it can also help you create long-lasting relationships with sellers and retailers. It’s also just as important to monitor MAP compliance and ensure your sellers are honoring and following MAP policies.
Request a demo to learn how you can automatically track MAP violations and remove unauthorized sellers.