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If you are like many of the clients I have worked with in the past who run successful eCommerce businesses, maintaining a strong brand identity is important. And if you are in a business where competition is fierce, one thing that probably worries you is how to protect your products’ pricing. How can you stop retailers from slashing prices to gain an advantage when customers compare your products to competitors? You don’t want your products advertised at bottom-of-the-barrel prices because it makes your brand less desirable. This is a common concern, but luckily, there is something you can do: use MAP pricing.

MAP pricing involves creating a legally binding document, a Minimum Advertised Price policy, that lets manufacturers, brands, and wholesalers control how low retailers can advertise their products. Retailers can still sell products for less than the MAP price. But they can’t advertise it for lower, either online or at their brick-and-mortar store. Later I will explain how these policies are enforced, but first, let’s take a close look at the advantages for manufacturers, retailers, and consumers.

This blog post is all about map pricing.

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Benefits of Using MAP Pricing

There are many important benefits to MAP pricing for manufacturers or brands, retailers, and consumers. Setting minimum advertised prices ensures that manufacturers and the retailers selling their products aren’t undersold. Everyone in the supply chain, including the end user, benefits from MAP pricing policies in different ways.

MAP Pricing Benefits for Manufacturers & Brands

You’ve worked hard to build your manufacturing or eCommerce brand, and you don’t want some retail outlets to devalue your brand. Here’s how a MAP pricing policy will protect your brand:

Prevents Brand Erosion

Imagine you’re shopping for a new TV and find one from a reputable brand listed at two different retailers. One is at full price, and one is at a significant discount. Which retailer seems more trustworthy? Chances are, you are automatically going to think something is off with that discounted TV – and you’d probably be right. Because often when a retailer deep-discounts items, it’s because the products are defective, returns, or damaged.

Would you want your product consistently featured at deep discounts, giving shoppers the wrong impression? Probably not. You have probably seen this in your own personal shopping experience. MAP pricing prevents this because retailers are not allowed to engage in extreme discounting, so brands are less likely to see their products perceived as less valuable.

Creates Fair Competition Among Retailers

Price wars, which sometimes happen when one retailer undercuts all the others selling the same items, are rarely ever good. Why? In an attempt to stay competitive, businesses end up slashing prices so low that they eat into their profit margins and sometimes lose money. MAP pricing policies keep this from happening. This ultimately helps ensure healthy competition and prevents retailers from going belly up.

Allows Manufacturers To Effectively Manage Their Brand Reputation

Luxury brands aren’t the only businesses that must maintain high brand equity. Think about your brand – your products would suffer if they were consistently given away at super low prices. What would that say about the products you work so hard to develop? Consistent pricing ensures that your products are always seen as valuable and exclusive. It also builds consumer trust and promotes brand loyalty. And we all know brand loyalty is priceless.

MAP Pricing Benefits for Retailers

Consumers aren’t the only ones who suffer when deep discounting is normal; retailers do too. They don’t have a lot of wiggle room to offer steep discounts if they are locked into a MAP price with manufacturers. However, MAP pricing protects them. Here’s how:

Prevents Profit Loss From Price Wars

I already mentioned this important aspect above, but this deserves further emphasis. When a retailer’s main advertising strategy focuses on rock bottom prices, they often end up selling at a loss. MAP pricing allows all businesses to profit from product sales. It also creates a level playing field that fosters healthy competition instead of a race to the bottom.

Provides a Safety Net for Smaller Businesses

When a small eCommerce store is competing against a huge retailer like Amazon or Walmart, they are rarely able to compete on price – the margins are too thin. These large companies have relationships with suppliers because they buy massive quantities. And because of this, they will always win.

But MAP pricing gives those small businesses the same advantage as everyone else. It ensures customers shop for features and benefits over who has the lowest prices.

MAP Pricing Benefits For Consumers

Consumers, especially those with limited budgets, love sales. We all want a deal and will sometimes go to any lengths to get it. Waiting up for Black Friday deals that end in fighting and chaos is just one example. But consumers want to know that when they find a sale, they aren’t being tricked into buying an inferior product.

When retailers participate in MAP pricing with the brands they sell, customers benefit from consistent and fair pricing no matter where they shop, which leads to more trust between retailers and their customers. This translates into customer satisfaction and positive associations with their buying experience – a win-win for everyone.

What Is the Difference Between MAP Pricing and MSRP?

When first learning about MAP, many eCommerce store owners and other online sellers think MSRP is the same thing. But although both strategies factor into how companies price items, they are not the same. They have key differences that set them apart. Here are just a couple:

How Each Strategy Is Used By Brands & Retailers

MAP policies give companies a way to set a bottom limit on advertised prices. MSRP gives a suggested retail price. Retailers aren’t required to use it and can completely ignore it. Many brands choose to show both on their pricing with a slash, like this: $39.99/$29.99. That clearly shows shoppers the manufacturer’s suggested retail price and how much of a deal they are getting by buying the product through that particular retailer. Both work together to increase customer interest and confidence while driving up sales for the brand or manufacturer and the retailer selling those items.

MAP Pricing Is Enforceable; MSRP Is Not

The second key difference between the two is how they are enforced (or not enforced in the case of MSRP, because MSRP is just a suggestion). Let’s take a close look at the enforcement of MAP pricing. While setting a minimum price can significantly impact sales, those policies don’t do much good unless enforced.

How To Enforce MAP Pricing

Even in the US, where MAP is legal (it is not in countries like the UK), creating policies and ensuring retailers adhere to those policies can be challenging for companies. First and foremost, you must realize it can be complex, especially for businesses selling many products through hundreds (or thousands) of different channels. That’s where hiring a lawyer and using automated solutions come into play to simplify the process.

An experienced legal team understands all the ins and outs of antitrust and other business laws. That way, no matter how large your operation gets, your MAP pricing strategy evolves with you in a legally compliant way. However, if you are just starting, here is an overview of the steps involved:

Determining Your Minimum Advertised Price

First, analyze factors like:

• The current value of your brand
• Marketing and production costs
• Analysis of competitors’ products
• Conducting surveys to determine ideal customer demographics

Use this data to create what you deem to be the absolute lowest price a customer would pay for a given product without devaluing what you are selling.

Creating a Unique MAP Policy (With Legal Counsel)

If you cut and paste another company’s policies and add your name, that’s not going to fly legally speaking. You want your MAP pricing to hold up legally, so hire that lawyer I already mentioned. Each MAP policy must be created in simple, easy-to-understand language. When determining your policy, weigh the pros and cons of creating pricing exceptions for certain seasons. For example, you could include a temporary discount or exemption to your MAP price for Black Friday to give retailers a chance to participate in the frenzy of discounts this one day brings.

A knowledgeable lawyer will also tell you if your state laws differ from federal guidelines. This happens more than you think (take a look at Tennessee’s laws regarding the minimum retail price for liquor). Your MAP pricing policy will have to abide by the stricter guidelines. For example, did you know California allows for vertical price fixing as long as doing so doesn’t hurt competition? If you sell many products to California customers, it would be in your best interest to understand this. Also, it is very important to never consult retailers before determining your MAP policy, as tempting as it might be – this is illegal.

Choose a MAP Monitoring Solution

After all the hard work you go through setting your policies, you need to be alerted to violations. There is excellent automated software on the market that can instantly crawl your website to locate pricing that’s out of whack. In fact, using such software solutions is vital and should be viewed as a mandatory expense for your business – much like legal advice.

Implementing Your Policy

One important aspect that must be crystal clear to retailers is the penalties involved if they do not follow the policies. What happens when they don’t adhere to your guidelines? After all, if retailers continuously ignore your policies, what’s the point of having a MAP agreement? Some businesses send warning letters. Others simply remove products from their stores (or refuse to ship to a retailer) as an initial way of enforcing pricing.

Most of the time, removing a product will get their attention because it is the only thing a retailer will understand. Whatever you decide as a manufacturer or brand owner, ensure the penalties for violating your MAP pricing policies are crystal clear, applied equally, and, most of all, explained in the written document all parties have signed. This simple step ensures that the playing field remains fair for all.

Conclusion

Successfully managing your Minimum Advertised Pricing (or MAP pricing) strategy might sound difficult, but it doesn’t have to be. It’s as simple as crafting policies specific to your brand while using technology and common sense. While implementing a solid MAP agreement into your overall business strategy helps keep profits high, it also creates fairness across the board because ultimately, when consumers trust your brand, everyone benefits.

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