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Last updated on: September 29, 2022
Thanks to the advancements in technology and the global COVID-19 pandemic forcing people to adopt the digital lifestyle, ecommerce is now everywhere.
This is obviously good news for consumers since the more eCommerce stores we have, the more competitive the prices will be. However, for eCommerce store owners, this phenomenon also translates into a stiffer, more challenging competition.
While competition is essential in eCommerce to ensure a fair price for consumers because when eCommerce stores have to compete to sell products, competition will automatically drive prices down.
However, this can only work if the competition is healthy, which is why MAP pricing is established.
Yet, what actually is MAP pricing? How will it affect eCommerce retailers? How do companies get around MAP pricing?
In this guide, we will answer these questions (and more), and discuss all you need to know about MAP pricing and eCommerce.
Without further ado, let us begin from the basics: what actually is MAP pricing?
MAP is an abbreviation for Minimum Advertised Price and is a policy (or policies) established by the manufacturer of a product, service, or brand to specify the lowest possible price point retailers (including eCommerce stores) may use when advertising a product.
It’s crucial to understand that legally, MAP only stipulates the lowest price an eCommerce store can advertise and doesn’t necessarily mean the lowest price an eCommerce store can sell a product in the store. MAP is only the lowest price they can show online, especially in an advertisement.
Nowadays, the majority of products available on the market have MAPs assigned to them. Depending on the brand, the type of product, your location, and other factors, MAP policies can be relatively simple or extensive.
Most established brands are also committed to monitoring the market for potential violations of their MAPs.
Technically, a retailer must agree to the MAP policy (or policies) before the brand will provide the retailer with the right to sell the product.
As mentioned, however, MAP doesn’t necessarily mean the lowest price a retailer can actually sell the product, but only the price they can show in advertising.
The actual definition of “advertising” can vary depending on the vendor’s interpretation. However, MAP policies are typically only binding for advertising off-site.
This means, in a scenario when you advertise on YouTube at the MAP price, manage to attract people to your website, and then you actually advertise on the website at a lower price than the MAP, this may be allowed by the brand. However, there are also brands that may see on-site advertisements under the MAP pricing as a violation.
This is why it’s important to carefully study the MAP policies assigned to the product you are selling to see what is and is not allowed. Some brands may offer exemptions and may allow you to advertise off-site under the MAP during the holiday season or when the advertisement is targeted at a specific group of people (i.e., refugees).
IMAP stands for Internet Minimum Advertised Price, and as the name suggests, it is a MAP policy that is established specifically when the product is sold online.
Some brands may have separate IMAP policies, but others may regulate both online and offline sales with the same MAP policies. Typically, there won’t be much difference between IMAPs and MAPs, but they can vary depending on the manufacturers’ preferences, locations, and other factors.
Another term that is often used interchangeably with MAP is MSRP, which stands for Manufacturer Suggested Retail Price. Some brands may also use terms like RRP (Recommended Retail Price) or SRP (Suggested Retail Price), but the meaning remains the same.
MSRP is guidance provided by a brand or the manufacturer of a product/service on how much a retailer should sell the item. Since an MSRP is simply a recommendation, unlike MAP, it is not legally binding.
In fact, to stay competitive, many retailers and eCommerce stores tend to sell their products below the suggested MSRP.
Is MAP pricing legal?
In the US, providing MAP pricing is legal, and thus the set MAP price point is legally binding for retailers and eCommerce stores. However, there are variations in regulations from state to state.
In European countries, however, MAP pricing may not be legal. Many countries in Europe allow retailers to control both in-store and advertised prices.
In the US, many established brands will have a contract you’ll need to sign if you want to be an authorized reseller of their products, in which MAP pricing is regulated.
As discussed, MAP pricing policies have a major loophole in the fact that they only regulate advertised pricing, and retailers can get around this fact by ensuring they are not advertising below the MAP.
Here are some examples of how retailers can use this loophole to get around MAP pricing:
This list is not exhaustive, and there are many different ways companies can use to get around MAP pricing, but the principles remain the same: ensuring they are not advertising under the binding MAP price but finding ways to inform customers that they can actually buy under this MAP price in one way or another.
For brands and product manufacturers, establishing MAP policies have many benefits and is actually beneficial even for retailers.
Here are some key benefits provided by an established MAP policy:
1. Protecting retailers from unhealthy competition
The key advantage of implementing MAP policies is preventing price wars, which have been becoming an increasingly problematic issue in recent years.
There has been increased adoption of repricing tools that automatically detect when a competitor has dropped their price on a specific product to below the price you are listing it at, automatically lowering your price for that product. Price wars can become uncontrollable and will be detrimental for both the product’s retailer and reseller.
With MAP in place, technically, a bottom limit is set for the price war, preventing prices from dropping below the wholesale price.
2. Ensuring quality and satisfaction for consumers
In a free-market environment, price is often one of the biggest factors consumers use when making a purchase decision, and this can be unhealthy for competition.
With MAP policies in place, the unfair price advantage is taken out of the equation, so resellers are ‘forced’ to be more creative in providing better service, retailer-specific perks, and other service-related improvements.
Ultimately, this can allow retailers and resellers to prioritize improving their service, improving overall satisfaction for consumers as the end result.
3. Making revenue more predictable for sellers
Since MAP policies ensure resellers’ pricing stays above a certain limit (the MAP), eventually, it can help stabilize the seller’s profitability, and it’s going to be easier for resellers to predict its revenue.
By eliminating the possibility of price wars, it’s less likely for sellers to face an unpredictable drop in profits due to unexpected low prices.
4. Natural selection to eliminate bad sellers
Not every reseller is going to provide added value to your brand’s reputation. Obviously, many sellers are only interested in making money, and they might not care about maintaining and growing a relationship with your brand.
With MAP policies in place, you’ll automatically filter out the bad sellers who are only interested in lowering their price point to compete with other resellers.
Ultimately this will help in creating a better, healthier competition for your resellers, which can indirectly help them grow.
5. More consistent pricing for consumers
As discussed, bad sellers may only focus on lowering their prices and not provide decent enough services to consumers: worst return policies, non-existent aftersale support, and so on.
Unfortunately, consumers tend to associate bad experiences they get from sellers with your brand, even if the bad experience isn’t technically your fault.
With that being said, an effective MAP policy will ensure more consistent pricing, so consumers don’t need to spend too much time hunting for the best deals and dealing with different resellers. Consistent pricing will allow them to stick with resellers that are the most legitimate, so it’s less likely for them to have a negative experience.
6. Building mutual trust with your retailers
While this might not be obvious at first, good retailers and resellers would actually appreciate brands with established pricing policies that are also consistent in enforcing these policies: they know that when their competitors are competing unhealthily, you’ll take care of it.
An effective MAP policy that is also effectively enforced can provide more safety to retailers, and they’ll feel that you value their business by ensuring competitors are not cheating.
With how beneficial establishing MAP policies is for both your brand and your reseller, it’s crucial to enforce retailers to stay within your MAP policies without risking legal issues.
Here are some tips on how to make sure retailers stay within your MAP policies:
1. Reward retailers and resellers for compliance
Forcing the implementation of your MAP policies is one thing, but you should also try putting yourself in your retailers’ shoes. In the end, they may only want to break your MAP policies in order to maintain their competitive advantage and not have additional malicious intents.
To prevent this issue, you may want to reward retailers and resellers, for example, with extra funds that they can allocate for marketing to “substitute” the competitiveness in the form of lower prices.
Motivating your retailers to stay within your MAP policies is often more effective than simply enforcing them.
2. Regularly monitor all channels for MAP violations
Even after you’ve established your MAP policies, your job is far from done.
It’s very important to regularly and constantly monitor both your online and offline sales channels to identify MAP violations as early as possible. In today’s social media age and multi-channel online shopping environment, it’s also crucial to monitor the mobile apps and social media pages of each retailer.
Obviously, this can be very time-consuming in practice, and this is why having MAP monitoring software, like Red Points’, is crucial in safeguarding your brand and ensuring the consistent implementation of your MAP pricing.
3. Be flexible: be less strict during promotional and holiday seasons
When rules are too rigid, violations are going to be more frequent.
This is why it’s important to try to be more versatile and flexible. You might want to be less strict with the MAP policies during holiday seasons and promotional seasons, allowing your retailers to advertise lower prices for a specific time period.
Giving your retailers more leeway can make them appreciate you more, so you can build and maintain better relationships with them.
Enforcing MAP policies and monitoring the implementation are obviously not easy tasks.
Yet, with Red Points, you can track and even respond to violations automatically by monitoring an unlimited number of ecommerce sites and more than 20 online marketplaces to find everywhere your products appear, then compares pricing to your policies.