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How to Create a MAP Policy

Posted on 9th August '23 in MAP Monitoring - Comments

How to Create a MAP Policy

Table of Contents

  1. MAP Policy Definition
  2. How Can You Develop Your MAP Policy?
  3. Steps for Implementing Your MAP Policy
  4. Understanding the Benefits of a MAP Policy
  5. Frequently Asked Questions

There are many steps included in creating a MAP policy, but the best one to get you started is researching competitors’ prices.

Knowing competitors' pricing can help you get a better idea of advertising prices for your products.

MAP Policy Definition

A MAP policy is a document that addresses the minimum advertised price (MAP) that retailers are permitted to use for a manufacturer’s products or brand when advertising them for sale. MAP policies are meant to keep advertised pricing fair for all sellers and manufacturers in the marketplace so that no individual retailer gets an unfair edge through price erosion, the practice of advertising exceptionally low prices to lure consumers.

How Can You Develop Your MAP Policy?

There are different steps involved in developing your MAP policy. They include establishing minimum prices, setting retailer relationships, creating an enforcement process, defining what MAP violations look like, writing the legal document for the MAP policy, outlining the template of the MAP policy and modifying your policy over time.

The Importance of Establishing Minimum Prices

Establishing minimum prices should be your first priority when creating your MAP policy. The price range you set should be a fair range by which your products or brand as a whole can be advertised. It shows the retailers you work with that they must abide by those established prices when advertising your products to keep the playing field level. On the flip side, not having such prices inked in a MAP policy opens the door for unfair pricing placed on your products, thus opening the door for issues for you, your brand, competitors, other sellers and consumers.

Why Set Retailer Relationships?

A big part of your MAP policy should focus on setting relationships with retailers. This establishes which sellers you do business with and who are allowed to advertise your products or entire brand. Typically, you will want these to be authorized sellers only who are known to do business with legitimate online marketplaces. Unauthorized sellers should be avoided as they can end up advertising your products on the gray marketplace and engage in price erosion to edge out the competition.

Why it’s Important to Establish an Enforcement Process

It’s crucial to establish an enforcement process when creating your MAP policy. It tells sellers with whom you do business that, in no uncertain terms, are they permitted to violate the terms of your minimum advertised pricing and that there will be repercussions for any violations. First, you need to decide on a specific process for enforcing your MAP policy. Once you have that decided, you can then outline the steps you will use toward the enforcement itself.

The Importance of Defining What MAP Violations Look Like

It’s possible that what one manufacturer sees as a MAP policy violation is not what the next manufacturer thinks constitutes one. As a result, it’s important to define what MAP violations look like to you. As a general rule, however, a violation involves price erosion, the unfair practice of dramatically lowering the advertised price of a product that goes far below the range set by the manufacturer.

You can also define what MAP policy violations look like by clearly outlining penalties for violations and establishing incentives for compliance.

Consider Clearly Outlining the Penalties for Any Violations

As part of your MAP policy, you should put emphasis on clearly outlining the penalties you plan to impose on sellers who commit violations when advertising your products or brand. Make sure that the language is clear and concise so that there is no question about your intentions on how to penalize those who violate your MAP policy. You may want to have a hierarchy for the penalties violators face; for example, a warning might be the first step, but after a second violation, you can take further steps such as ending your business relationship with the seller.

Consider Establishing Incentives for Compliance

Sellers who comply with the terms of your MAP policy should be revered. As a result, you can establish incentives for compliance. You can even do this for those who have previous violations but made a turnaround and have since made a conscious effort to adhere to the agreed-upon minimum advertised price. You can include in your MAP policy that among the incentives sellers can look forward to are special wholesale pricing or special marketing funds.

You will want to ensure that you write the legal document for your MAP policy so that it complies with state and federal laws. To do that, certain steps are necessary. They include collaborating with an antitrust lawyer, creating a pathway to terminating seller relationships, explaining the appeals process, providing the process retailers can follow to claim MAP violation and considering including seasonal exemptions.

Why Should You Collaborate with an Antitrust Lawyer?

When a manufacturer aims to create a MAP policy to ensure fair pricing for sellers to advertise their products or brand, it’s best if they collaborate with an antitrust lawyer. This is because an antitrust lawyer understands the state and federal laws surrounding appropriate minimum advertised pricing so that the market can remain competitive and fair for all parties. The attorney can coach the manufacturer on all pertinent laws so that they can make their MAP policy legal and valid.

Understanding How to Create a Pathway to Terminating Seller Relationships

One of the main goals of your MAP policy should be to explain that you will ultimately terminate relationships with sellers who persistently violate your minimum advertised price when advertising your products or brand. In order to effectively do this, you need to determine the criteria that lead to terminating seller relationships. A good place to start is to first impose suspensions on sellers who violate the terms of your MAP policy. This can be in periods of 30 or 60 days or even longer depending on your preference. Then, if any subsequent violations occur, you can terminate your relationship with those sellers.

The Importance of Explaining the Appeals Process

Not all violating sellers are going to accept the penalties imposed upon them when the manufacturer enforces their MAP policy. Because of this fact, it’s crucial to include a detailed appeals process for such sellers if they disagree with the penalties. In some cases, the terms of a MAP policy may be violated through an honest mistake. This is why it’s necessary to have an appeals process. It should be explained in clear detail so that you can respond in a consistent manner. The appeals process should be in full detail in writing and formally. All appeals should then be directed to your antitrust attorney to determine whether they are valid and the decision on the seller should be reversed.

How to Provide the Process Retailers Can Follow to Claim MAP Violation

Your MAP policy should always explain the process for legitimate sellers who comply with your minimum advertised pricing so that they can report MAP violations they spot online. When you have relationships with loyal, legitimate retailers, you can trust them, and they can help your business in more ways than one. Maintaining a good professional relationship can prompt these sellers to follow the terms of your MAP policy and point you to those who appear to be in violation of it.

Why You Might Consider Including Seasonal Exemptions

During some times of the year, you might want to consider including seasonal exemptions where you allow sellers to advertise your products or brand below your agreed-upon minimum advertised price. For example, Black Friday and Cyber Monday typically offer consumers great discounts on all types of products and brands. You can make an exception for your partner sellers by allowing them to advertise your products at even lower prices during these events. Doing this can also help entice more customers.

Understanding How to Outline the Template of Your MAP Policy

Every manufacturer who has a MAP policy needs to develop a specific template. Knowing how to outline the template is crucial in ensuring that it works for your brand and image. Above all else, your template should be strong and fit the needs of your brand. It should allow for outlining all the rules, procedures and other criteria of your MAP policy.

Why Should You Modify Your MAP Policy Over Time?

It’s important to modify your MAP policy over time as your needs change. You may have to take various factors into consideration, some of which may not be within your control such as inflation, which can factor into making changes. Perhaps, in the future, your brand shifts somewhat, warranting modifications to your policy.

Whatever the case, you should periodically revisit your MAP policy over time. You never know when you might find a reason to modify it so that it makes more sense and better suits your brand’s needs.

Steps for Implementing Your MAP Policy

There are various steps you must take to implement your MAP policy. They include communicating the MAP pricing to retailers, maintaining relationships with retailers, monitoring unauthorized sellers and price wars and ensuring compliance with your MAP policy’s pricing.

Understanding Why You Must Communicate the MAP Pricing to Retailers

Clearly communicating the MAP pricing to retailers ensures that they understand where you stand in terms of the minimum advertised price range you have set for them to advertise your products or brand. It clearly tells them that they cannot go below those numbers and that you are serious about preventing price erosion.

Why Maintain Relationships with Retailers?

When you maintain relationships with retailers, you build a steady, reliable business model for your brand that can last for many years to come. This doesn’t just mean developing relationships with a few sellers and dissolving your partnership after a short time; instead, you should aim to keep those relationships so you can continue a mutually beneficial professional partnership to build your brand and increase your customer base.

The Importance of Monitoring Unauthorized Sellers and Price Wars

Keeping on top of unauthorized sellers is essential to ensuring that your MAP policy is followed. Unauthorized sellers don’t care about adhering to your policy and will go to any length to commit price erosion. In turn, this leads to price wars among sellers as they strive to offer the lowest advertising price possible to entice consumers and gain an unfair, uncompetitive edge. Monitoring price wars can help you and your sellers so that you can keep things fair. Using MAP monitoring software is a choice any businesses make.

Be Diligent About Ensuring Compliance with Your MAP Pricing Policy

It’s crucial to ensure compliance with your MAP pricing policy. This keeps sellers in line and makes the market more competitive, and thus, better for everyone. Manufacturers, sellers and consumers can all reap the benefits. If a seller strays from the terms of your MAP policy, you can then take action.

Understanding the Benefits of a MAP Policy

There are various benefits of a MAP policy. They include no more price wars, avoiding being a loss-leader, keeping yourself competitive, cutting poor performance and being more attractive to brick-and-mortar stores.

Why You Should Want Price Wars to End

One of the biggest benefits of a MAP policy is the end of price wars. This is something all manufacturers and sellers should aim for as it keeps things more competitive and doesn’t give an unfair advantage to one retailer versus another. Consumers are also better able to find products and brands they want without issue. As a manufacturer, it’s better for your brand when price wars end.

You Can Avoid Being a Loss-Leader

The last thing you want is to lose money with sellers advertising your brand through price erosion. A notable benefit of having a MAP policy is that you can avoid being a loss-leader. You don’t have to lure customers to your brand with pricing that prevents you from making a profit.

Staying Competitive in the Market

With your MAP policy, you can benefit from staying competitive in the market. When sellers adhere to your minimum advertised price, it shows prospective customers what they might expect if they choose to buy your products or brand.

The Importance of Cutting Poor Performance

With a MAP policy, you can cut poor performance that might otherwise hurt your brand. If sellers are doing badly or violating the terms of your MAP pricing, you can end your relationship with them and look ahead to continuing business with those who follow the rules.

You Can Appear More Attractive to Brick-and-Mortar Stores

Having a MAP policy makes your brand more attractive to brick-and-mortar stores. If your products and brand are currently only sold online, fair and competitive MAP pricing can encourage brick-and-mortar stores to do business with you and carry them for sale.

Frequently Asked Questions

How Do You Create MAP a Policy?

There are many steps to creating a MAP policy, but knowing how to draft an outline showing a competitive minimum advertised price is important. Speaking with an antitrust attorney can help you know how to MAP a policy that’s fair and complies with federal and state laws.

What Does MAPP Stand for in Pricing?

In pricing, MAPP stands for “minimum advertised price policy.”

What Is the MAP Policy in the U.S.?

The MAP policy in the U.S. relates to the minimum advertised price a manufacturer allows sellers to advertise their products through stores. MAP policies are also designed to tell sellers what’s allowed and expected of them and what constitutes a violation and how they might be penalized if they violate the policy’s terms.

How to Get Around MAP Pricing

Retailers can get around MAP pricing by displaying a “call to action” button while advertising products online. That button might invite customers to click to see a better price. From there, a customer can receive an email discussing how they can get that lower price.

MAP pricing is legal as long as it follows federal and state laws.

MAP Pricing vs MSRP

MAP pricing involves the minimum advertised price that sellers can advertise a manufacturer’s products. Meanwhile, MSRP means “manufacturer’s suggested retail price.”

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