E-commerce has become an indispensable part of the global retail framework over the last few years. Did you know that 2020’s e-retail sales surpassed 4.2 trillion USD worldwide? Yes, you read that right.
Competition is a natural and fundamental aspect of e-commerce. The best deals (and, sometimes the cheapest) attract consumers on a large scale. But, does this mean that you can slash product prices as per your strategies? What happens if your competitors do the same, and it essentially makes way for a price war?
MAP (Minimum Advertised Price) is the answer you are looking for. A brand’s MAP policy outlines the minimum price which retailers can advertise their products for sale. Such a policy not only helps promote price consistency but also benefits retailers and resellers.
In this article, we will quickly cover the what, why, and how of everything related to MAP pricing.
What is MAP Pricing?
MAP is an acronym for Minimum Advertised Price. It comes in the form of policies enforced by manufacturers. A MAP pricing policy stipulates the lowest price that online retailers can advertise products with.
There are MAPs for almost every product in the world, and they ensure that there is a level-playing field amongst retailers.
What Happens if a Retailer Sells Below the MAP Price?
In case a retailer advertises a product below the MAP price, brands have the legal right to withdraw their products. They can further restrict future sales and/or refuse to replenish the respective retailer’s inventory again. It is ideal to adhere to the stipulated MAP pricing and build lasting relationships with manufacturers.
In the United States, MAP policies are legally authorized. Federal Antitrust Law regulates MAP violations. This is because MAPs keep a check on advertised pricing instead of the final selling price. Thus, one can expect serious repercussions for advertising below the said MAP.
On the contrary, MAP policies are looked upon as an infringement of the competition laws in Europe. As a matter of fact, manufacturers will be fined if they enforce MAP policies on retailers.
Read more: How does MAP Violation work?
MSRP vs. MAP: Know the Difference
Let us understand this with an example:
Suppose that a Brand A sets an MSRP at $70 and a MAP for their newly launched product at $50. This implies that any retailer or reseller in the US is legally obligated to advertise that product at $50 or above. However, it won’t be an issue if they sell it for a price less than $70.
Retailers often price their products below MSRP as a product’s actual pricing in the market tends to decrease over its lifecycle. MSRP is also commonly referred to as the SRP (Suggested Retail Price) or the RRP (Recommended Retail Price).
MAPs are deemed more important by manufacturers. Advertisements (with MAP policy violations) might send a wrong message to the target consumers.
Therefore, these two policies work together to ensure manufacturers maintain their margins and a strong brand image.
What Is a MAP Policy?
In the US, a MAP policy is a legal binding between manufacturers and retailers. It is agreed upon by both parties before the products are sourced. It is worth noting that the fine print varies with suppliers.
The traditional meaning of ‘advertising’ implies offline listings. However, some suppliers might deem lower pricing on online advertisements unacceptable. At the same time, some suppliers might agree to sellers advertising at the stipulated MAP and then advertise on-site at a lower price. To put it concisely, what falls within the bounds of the agreement and what doesn’t, depends on the manufacturer.
Some manufacturers even make special allowances for MAP (Minimum Advertising Price). For instance, a few brands let retailers advertise their products at a price lower than the MAP to groups like active-duty military service members or veterans. However, it is on the retailer to prove that these provisions apply to such groups alone.
Why Do Brands Need MAP Policies More Than Ever in 2022?
The pandemic has altered the shape of several industries in different ways. While some saw a steep decline in numbers, others saw skyrocketing growth.
Online retail is one such industry that was fueled and propelled by the Covid-19 pandemic. Reports show that the e-commerce sector saw a ‘dramatic’ rise in its share of all retail sales, from 16 percent to 19 percent in 2020. The industry hasn’t seen a fall in numbers since then.
As technology continues to change how consumers shop, manufacturers should be prepared to adapt to the dynamic retail environment. Surveys show that prices are one of the strongest factors for consumers to buy from online stores. Another study showed that 65 percent of shoppers compare prices online before buying. It is understandable how pricing is important to consumers and sales to retailers.
Online sellers often slash prices to navigate this cut-throat competition in the market. Without a well-planned pricing policy, you might have too many unknown sellers, a huge difference in your product’s pricing across the marketplace, and also receive grievances from your best retail partners.
If you are a manufacturer, it is now more important than ever to have strong MAP policies in place and protect your products. Such a policy standardizes the prices of products across all resale channels. This provides every retailer you have partnered with, an opportunity to compete in the marketplace. Moreover, it enables you to build strong and lasting relationships with trustworthy retailers.
Here are the top advantages of setting a MAP policy for your products in 2022.
Without a MAP policy in place, you risk having retailers advertise your products at unreasonably low prices to:
- Enhance in-store footfall
- Increase website traffic
- Clear out stock
Moreover, a place on the digital shelf of giant marketplaces like Amazon can force sellers to introduce hefty discounts to boost their sales.
In any of the above cases, the value of your product and your brand image might be tarnished in the eyes of consumers. This outlook towards your brand might in turn affect the reputation of your high-end product ranges. Thus, it is recommended for manufacturers to retain control over their products’ MAP.
Alongside manufacturers, a MAP policy also ensures the best interests of retailers. When some retailers slash prices to boost sales, others are forced to do the same under competitive pressure. This race will eventually eat into the retail margins. This can reach a point where it doesn’t make any sense for a retailer to stock the respective brand’s products.
Now, a MAP policy restricts the selling behavior of certain retailers and thereby, prevents such situations. In the long term, it fosters good relationships between retailers and manufacturers. The share of e-commerce sales is projected to reach 21.8% by the end of 2024. With online retail marketplaces contributing to a significant part of the total sales, it is now more essential than ever to have such relationships with retailers.
More Number of Sales Channels
A properly laid out MAP policy protects the interests of any type of seller – be it retailers or resellers. It helps them believe they can stock your brand’s products without distress, and sell them at a competitive price.
This can directly increase the number of sales channels your products will be advertised and sold on. More sales channels eventually mean higher sales, and this forms a crucial part of a robust omnichannel strategy. An omnichannel strategy allows you to drive sales, and consumer reach and integrate digital touchpoints. Such a strategy improves customer experience and offers more channels for consumer purchases.
Precise Performance Analysis
When all the sellers operate within a common price range, it helps brands get an accurate picture of how their products are performing in the market. Manufacturers can get real insights into consumer behavior, retailer performance, product performance, and much more.
Studies show that the global market space is bustling with new products. About 30,000 new products are launched every year across the world. With multiple brands competing to be under the product spotlight, a precise performance analysis gives you the edge over others. You can race ahead of other brands by focusing on pain points nobody has touched before.
How Do You Create a MAP Policy?
Here are six simple steps to create an effective, legal MAP (Minimum Advertised Price) policy:
Thoroughly Research and Understand Your Competitors
Research forms the preliminary step in researching the market. You need to observe the pricing trends for similar products from competitors. You need to ensure that your MAP is close to what your competitors have set. Too much variation can lead to you being singled out and investigated under antitrust legislation.
Consider the Current Standing
It is absolutely essential for brands to get a good grasp of their current standing in the industry. This understanding is imperative as not all brands are as well-established as Apple or Reebok. Such big brands have an unparalleled reputation and a loyal consumer base.
This gives them the privilege to decide the pricing. However, the smaller, emerging brands should act realistically, study market reactions, and set MAP policies based on their brand position.
Fix Suitable Margins
You need to decide on the appropriate margins while making your MAP pricing policy by taking the following factors into consideration:
- The decided margin should cover all your expenses and ensure that you gain profits at the end of the day. Simply put, get the numbers and economics right!
- The margin on each product should not be so high that it distracts the attention of the consumer from the offer at hand.
Craft a Policy Template
Once you are done with the first 3 steps, you need to draft a MAP policy template before sharing it across your distribution network. Please note that a generic, off-the-internet template is never the ideal option.
Spend time customizing the policy and ensure that it caters to each specific requirement of consumers and retailers. Moreover, having an in-house MAP policy template will help you conveniently deal with policy violators (if any) properly.
Consult With a Legal Advisor
Do not make the mistake of putting your MAP policy out there before confirming with a legal advisor. Confirm if every detail of your policy is legal and make changes wherever necessary.
Finally, Enforce It
The last and most important step is to enforce the MAP pricing policy across all your retail networks. A strong policy will do well in ensuring that the brand is not granting any favors to select retailers and has a consistent brand image. This guarantees that brands enjoy an impressive network of retail connections.
How Do You Enforce a MAP Policy?
Once you have crafted an effective MAP policy, you will need to successfully enforce it. We have listed 6 practical tips that will be useful in implementing your policy. Check them out below:
Draft a unique MAP policy
The importance of creating a unique MAP policy goes without saying. It is recommended to craft a policy that takes specific needs, goals, pain points, and other crucial data into due consideration. Only this can make a MAP policy truly effective.
In any other case, you will end up creating guidelines that work against your business instead of protecting it. Do not shy away from taking legal assistance to make sure that the guidelines are accurate and adhere to all the antitrust laws.
Refrain From Consulting Retailers
Always remember to craft your MAP policy independently. Do not let retailers interfere or give inputs, as such a step could be conceived as a violation of antitrust laws. Don’t request any third-party stakeholders for opinions to stay away from court hearings or penalties.
Introduce a Reward System for Compliant Retailers
Did you know several brands introduced a cooperative fund that helps compliant retailers cover marketing expenses? Yes, and it particularly proves helpful in cases where some retailers are obliged to follow a MAP policy, exempting others.
Additional financial support can help retailers sustain a competitive edge. In case the retailers fail to comply with the MAP policy rules, it requires them to return the cooperative funding. So, a reward system not only establishes ground rules but also ensures that retailers stick to the rules.
Say Yes to Seasonal Exemptions
Most brands waive off any such MAP policy restrictions during mega sales or such seasonal events. Black Friday, for instance, creates quite a buzz among consumers. If brands offer flexibility on occasions like this, they will still be able to hold their reputation well. Moreover, it also lets retailers enjoy higher profits.
Indulge in Clear Communication
Always communicate your MAP policy guidelines clearly to avoid unwanted confusion and maintain positive relationships with sellers. Usually, MAP policies are easy-to-understand but sometimes, legal jargon can be difficult to process.
If this happened with your MAP policy documentation, take steps to clear any confusion. You can use checklists, videos, PowerPoint presentations, or well-briefed brand representatives to help retailers understand and comply with your MAP policy.
Enforce a Comprehensive Review Process
Close observation and keen monitoring form a crucial part of the enforcement process. You need to monitor prices across the websites, marketplaces, and social media channels of retailers.
In addition, be prepared to address the breach in case it happens. Inconsistent MAP policy enforcement can undermine the significance of the policy. Therefore, retailers are less likely to stick to the rules.
Although it may seem like a counter-productive idea to prevent a seller from selling your products, it is ideal to take steps that benefit your brand and business in the long run. That said, we recommend you give every retailer an opportunity to comply with the set rules before cutting ties with them.
Several brands employ a three-strike system after which the retailers are no longer allowed to be part of the brand’s distribution network.
How Do You Monitor Your MAP Policy?
MAP and MSRP policies need to be publicly established, regularly monitored, and strictly enforced – the only way to ensure they work best for manufacturers. But, how? The most efficient way to do this is to employ an advanced MAP monitoring solution. But first, let’s understand the scope of continuous monitoring of MAP.
What Is MAP Monitoring?
MAP (Minimum Advertised Price) monitoring is the act of monitoring online product prices across digital platforms to detect MAP violations. You can do this in two ways: Manual and Automatic.
Manual Price Monitoring
Manually identifying discrepancies in policy compliance can be a challenging task, especially if you have partnered with multiple retailers.
As part of manual checking, you will have to go through multiple steps. They include:
- Finding sellers and cross-checking all their advertised prices with the pre-decided MAPs.
- Contacting and sending warnings to violators (if any).
- Re-checking if the violators have modified the previously advertised prices and complied with your MAP policy.
- Following up with sellers in case they have not taken any action despite your warnings.
- Giving a final warning and breaking ties if they fail to respond appropriately.
When done manually, monitoring a network as small as 20 can be extremely time-consuming and draining. Furthermore, the process never ends. You are required to keep an eye out always.
Advantages of Using a MAP Price Monitoring Solution
On the other hand, automatic tracking can reap significant benefits. You can avail yourself of the assistance of automatic price monitoring systems. These solutions automatically track all the pricing information across the e-commerce channels and deliver it to your inbox.
Advanced MAP price monitoring solutions free up your valuable time by automating these processes:
- Tracking data and producing a list of sellers who offer your products in the market.
- Monitor information on how your products are priced in different marketplaces.
- Increase and decrease in prices of your products across platforms.
- Flagging prices and notifying you of sellers that violate your MAP policy.
Thus, automation is a stable and reliable alternative to manual price monitoring. Besides, it is also more efficient when compared to the manual process. A MAP price monitoring system can help you effectively address crucial pain points, especially when you have a wide range of products under your brand.
Get Started Now!
MAP (Minimum Advertised Price) pricing for every product might seem impractical at the start. However, the increasingly competitive e-commerce market calls for a well-planned MAP policy irrespective of the brand and its products. Just ensure that your MAP policy is also legally sound and you are good to go!
If you are looking for a robust price monitoring solution to monitor MAP prices, track sellers, and get more actionable insights, contact us now!
Is MAP Pricing illegal?
No. MAP are legal in the US.
That said, there might be some variation from state to state, but most legitimate brands have a set policy in place.
Can You Sell Below MAP Pricing?
The MAP policy prohibits online retailers from advertising products below the MAP (Minimum Advertised Price).
How Will You Know if a MAP Violation Occurred?
A MAP policy violation happens when a retailer fails to comply with the rules of the policy agreed upon. Such a violation can be conveniently traced using an automatic price monitoring solution that keeps track of all the sellers you have tied up with.
What Is MAP Pricing on Amazon?
MAP is a pricing policy enforced by manufacturers. It dictates the lowest price their distributor or reseller can advertise the products online on Amazon.