Map pricing policies are a great way for brands to protect the reputation of their products and to promote a healthy business environment for their retail partners.
There is fierce competition among retailers to secure and sell products of a well-known brand. However, oftentimes, the big, well-known retailers can have an advantage over smaller, independent retailers. This advantage makes it affordable for these big retailers to sell branded products at such a low price that it forces the smaller retailers to either:
1- Not procure that particular branded product
or
2- Lower the price to the same level and incur a loss
Brands can ensure that all retailers have a fair chance at selling their products by implementing a MAP policy.
In this article, we will cover MAP pricing in depth; what it is, what it does, etc. At the end of this article, you will have a much better understanding of MAP and its benefits. Furthermore, you will also learn how you can create your own MAP policy.
MAP stands for minimum advertising price. It is the minimum price retailers are allowed to advertise a brand’s product in various advertising mediums. Furthermore, this minimum advertising price comes in the form of a MAP policy.
A MAP policy is like a “terms and conditions” document. Brands expect retailers to abide by the MAP policy when retailers procure the brand’s product(s).
If a retailer wants to have good relations with a brand, it will have to comply with the brand’s MAP policy.
Keep in mind, that a MAP policy only affects the advertised price of a product. Moreover, retailers are free to increase or decrease the actually selling price of the product in their stores. However, it is in the best interest of retailers to keep the selling price less than or equal to the advertised price. This is to avoid losing customers.
If retailers sell a product for more than the advertised price they could:
It is important for brands and retailers to distinguish between MAP and MSRP. MSRP stands for “manufacturer’s suggested retail price”.
MSRP can also be synonymous with:
Both MAP and MSRP have different purposes and functions.
MAP dictates the minimum advertising price for a branded product. Moreover, retailers who do not abide by a brand’s MAP pricing policy can be penalized by the brand.
MSRP, on the other hand, is a recommendation made by manufacturers or brands to retailers on what price their branded product should sell at. Furthermore, MSRP is a way to help online and offline retailers determine at what price point to sell the brand’s product.
MSRP can be increased or decreased at the retailer’s discretion, usually due to various market conditions. However, a retailer cannot get penalized by a brand for selling above or below the MSRP.
This is the main difference between MAP and MSRP.
When brands distribute their product to different retailers they usually implement a MAP pricing policy to ensure the integrity and reputation of their product.
A brand’s product is distributed to retailers of many sizes and financial capacities. For example, a brand can distribute its products to big retailers such as Walmart and Costco, and to small independent retailers such as corner stores and groceries.
The issue occurs when big and affluent retailers advertise a branded product at a drastically lower price. This incentivizes consumers to buy from these big retailers. Moreover, consumers will be less likely to buy from smaller retailers who cannot afford to advertise a branded product at such low prices. As a result, the smaller retailers are forced to advertise at low (or lower) prices. Furthermore, this causes the smaller retailers to incur a heavy loss.
Furthermore, the cycle of lowering advertising prices can repeat itself if the big retailers reduce their prices even further to be more competitive. Over time, the price of the product might get reduced to such an extent that it may be viewed by consumers as a “cheap, low quality” product. This is severely detrimental to a brand’s reputation.
So to prevent price collapse or price wars between retailers, a brand can set a MAP policy to fix the cheapest price at which their products can be advertised to consumers.
By using a MAP policy, a brand will provide a “fair playing field” for all retailers in terms of advertising price. As a result, this will prevent the cycle of price drops and damage to the brand’s reputation.
On paper, MAP policies might seem like a way to discourage competition among retailers. However, in reality, it is a perfect method to encourage more and more retailers to procure branded products.
MAP policies have a number of benefits for both brands and retailers. Let’s take a look at some of these benefits.
As we mentioned before, MAP pricing policies prevent wealthy retailers from advertising a branded product at “cut-throat” prices, thereby preventing small, independent retailers from having a fair chance to sell the branded product.
With a MAP policy in place, all of a brand’s retail partners will be required to advertise at a minimum product price. As a result, consumers will not “discriminate” between a branded product that is available in different size retailers.
Brands also benefit from issuing MAP policies because the price of their product is always advertised at or above a fixed price point. This enables the branded product to be advertised at a price that reflects high quality. Moreover, retailers will not be able to tarnish the reputation of a branded product by advertising it at prices that reflect poor quality.
The MAP policy sets a standard in the consumer’s mind about the quality of the product. This is done by making sure a branded product is not advertised below a certain price, thereby showing the branded product’s prestige.
Issuing a MAP pricing policy encourages more retailers to procure a brand’s product to sell because they know they will have a fair chance to sell your products. In addition, a MAP policy is most likely to attract small and independent retailers who are more in number than big retailers.
By selling to different retailers, a branded product will be stocked in many different places and locations, and this can be a good way to increase a brand’s awareness in places far and wide, such as rural areas.
Retailers can also increase their sales and increase the visibility of their retail outlets by using a product and store locator widget on their website. A product and store locator widget is a perfect way for retailers (and brands) to accurately communicate with customers:
Software programs, such as WP Maps, can be used to easily add a product and store locator widget to a retailer’s or brand’s website.
Having more retailers procure your branded products due to MAP pricing policies can lead to more sales from multiple sources or channels.
By implementing a MAP policy, a brand can make its product accessible to many retailers who will be encouraged to procure and sell the brand’s products.
By encouraging more retailers to procure a brand’s product, the brand will have the opportunity to make sales from various sales channels. For example, a brand can diversify its sales channels by selling its product to brick-and-mortar retailers, online retailers, wholesalers, etc.
Having multiple sales channels gives brands the opportunity to implement an omni-commerce strategy that can greatly benefit their business. In addition, brands can enhance their omni-commerce business by adopting 5 omni-commerce business improvement strategies and by using 5 useful omni-commerce tools.
If you recently don’t have an omni-commerce business model, you may want to consider transitioning to an omni-commerce business model.
Having a MAP pricing policy is also an excellent way for a brand to see if its product is well received by consumers when the advertised prices are uniform across the board.
With a MAP policy, retailers will be prevented from driving more sales by advertising a brand’s product at discounted prices. As a result, a brand can get accurate data on how their product is performing with the interference of discounted prices. This is because discounted prices usually drive sales at a price point that does not reflect the actual price of the product. Therefore, the brand cannot determine if sales are happening because of product quality or price discounts.
Brands can use a MAP pricing policy to evaluate which retailers are worth doing business with.
If there are retailers who are opposed to a brand’s MAP policy, then this is a clear indication that they might potentially damage the brand’s image by advertising the brand’s product at low prices, and thereby undermine the brand’s products.
However, the retailers who are more than happy to comply with your MAP policy are the ones whom a brand can trust to uphold its reputation.
By “filtering” retailers, both brands and retailers stand to benefit. The brand will be doing business with retailers who will not tarnish the brand’s reputation. Furthermore, retailers will benefit by having a fair playing field with less competition.
Some people might be wondering if MAP policies are even legal. Well, the short answer is yes and no. It all depends on which part of the world a brand is operating in.
In the US, MAP pricing is legal because it (the MAP policy) only dictates the advertising price and not the final sales price. There may be slight variations in the legality of MAP policies from state to state. Therefore, you should always consult a lawyer before implementing a MAP policy.
In Europe, MAP pricing is illegal because it is seen as anti-competitive. Moreover, in Europe, advertising price and final sales price are to be at the sole discretion of a retailer. However, there can be cases in which MAP usage is allowed if a retailer is deliberately selling a brand’s product to increase traffic to their stores.
Lastly, there have been cases of brands being fined in the following countries for implementing MAP policies on retailers:
In conclusion, it is better for brands to consult with a lawyer to determine whether MAP is legal or not in the region they are operating in.
In this section, we will go over some steps that brands can use to create an effective MAP policy.
The very first thing a brand needs to do is to study their respective market and determine at what price point their products should be sold.
The product should be priced at the right amount, not too high and not too low. A high price will discourage a large percentage of your target market from purchasing the brand’s product. However, the price should also not be so low that it leads to brands sacrificing their profit margins.
The next step for brands is to create a MAP policy that is specifically designed to achieve a brand’s goals.
In this step, it is better for brands to not use a generic MAP policy template, as this can often create clauses that go against a brand’s interest.
Lastly, a lawyer should be consulted to make sure the MAP pricing policy is legal in the region where the brand is operating. Legal advice can also be taken to make sure the MAP policy is binding, and that it is complying with local laws.
The most important part of creating a MAP policy is to determine what minimum advertising price to set for retailers.
A brand needs to make sure that the minimum advertising price accurately reflects the brand’s prestige and reputation.
A low MAP will often cause consumers to perceive a brand’s product as “cheap”, and of low quality. Moreover, a low MAP may create unwanted competition for the brand itself if it is also selling the product.
At the same time, if the minimum advertising price is very high it will not attract many retailers (especially small ones) for procurement. As a result, the brand’s product might only get procured by high-end retailers. This can have a negative effect on the sales of the branded product because the branded product will be limited to only a few retailers.
For brands to avoid any miscommunication and misunderstandings with retail partners, they must ensure that their MAP pricing policy is simple and straightforward. Furthermore, it should not be confusing for retailers.
Brands can also use supplementary resources to clearly communicate the main points of their MAP policy with retailers. These resources can include things like:
To make MAP pricing policies attractive for retailers, brands can introduce certain clauses that will encourage retailers to accept and comply with the brand’s decisions.
For example, a brand can implement a reward system, whereby retailers who follow their rules are rewarded with discounts, extra supplies, contract extensions, etc.
Another way to attract retailers is to have exceptions to the MAP rules. For example, the MAP rule can be waived during certain times of the year or for retailers who have low marketing budgets.
Once a brand has created a MAP policy, and attracted enough retailers to procure its products, it is now in a brand’s best interest to help or advise its retail partners on the best way to sell their branded product(s).
One way through which a brand’s retail partner(s) can raise awareness and increase sales of the branded product is by using a product and store locator widget on their (the retailer’s) website. A product and store locator, such as WP Maps, provides the following benefits for a brand’s retail partner:
Once a brand has created and implemented a MAP pricing policy, the next course of action is to make sure this brand’s retail partners are actually complying with the brand’s policies.
Making sure that a retail partner is advertising at the price dictated by a MAP policy is an almost impossible task because there are only so many advertising channels a brand can monitor or check.
A retailer might be advertising as per the MAP rules on their website, but they could be advertising the brand’s product at a lower price through other advertising channels.
Luckily for brands, there are MAP price monitoring software, such as Prisync, that are specifically designed to monitor if retailers are complying with a brand’s MAP pricing policy.
MAP price monitoring software like Prisync provides brands with an easy way to find out if their partner retailer partners are advertising the brand’s product at or above the minimum advertised price.
See this article for more information on MAP monitoring.
Once a retailer signs a MAP deal with a brand, that retailer is obliged to advertise the brand’s product at the price stipulated by the brand.
Complying with the MAP pricing policy of a brand is a good practice for retailers as it shows they are an organization that is interested in doing business with a brand. Furthermore, it indicates that a retailer will uphold the reputation of the brand by not advertising the brand’s product below a certain price.
If a MAP rule is violated the first course of action a brand can take against a retailer is to issue a warning. If the offense is still repeated, then brands can take other actions against a retailer.
Brands can legally take action against retailers who advertise below the MAP by:
Implementing a MAP pricing policy is a strategy that brands can carry out to protect the reputation of their products and themselves.
By having a MAP policy in place, brands can ensure retailers do not degrade their products by advertising them at cheap prices and thereby, create a low-quality perception of their products.
Moreover, having MAP rules is also an excellent way for brands to attract more retail partners by providing a fair environment for retailers of all sizes to compete in i.e. a “level playing field”.
Although some might consider MAP settings as anti-competitive, they actually are designed to encourage competition by standardizing the minimum advertised price of a branded product.
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Waleed Daad Khan is a results-driven Marketing Consultant with a passion for Businesses. He holds certifications From Wharton, McKinsey, Hubspot and SEMrush, and has helped businesses of all sizes improve their online visibility and reach. With 4 years of experience in the field, Waleed stays up-to-date on the latest digital marketing trends to deliver cutting-edge strategies.
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