What is a MAP Pricing Policy?

WHAT’S A MAP PRICING POLICY?

This is the first post of our two-part series, A Beginner's Guide to a MAP Policy. If you’re already familiar with the what, how, and why of a MAP policy, jump to, "How to Start MAP Monitoring in 30 Days."

MAP policies seem to be popping up everywhere. So, what the heck is a MAP policy? How do I get started with monitoring my policy? I’m sick of manually trying to find a needle in a haystack. Is there a way to automate the MAP enforcement process?

It doesn’t matter where on the spectrum you are, it’s time we all get on the same page. Let’s start at the basics of the MAP policy world. We’ll answer questions like, what’s a MAP policy? How did MAP policies come about? Why does every brand need one?

This will give you a fundamental understanding of MAP Policies and MAP Pricing Policies. You may need to revisit this section a few times as you start map monitoring and enforcing your policy. It’s your rhyme and reason, the “why” behind every email you send, deadline you set, and consequence you evoke.

...Then, what?

Don’t worry, we won’t leave you hanging. We’ll take you through a step-by-step guide of a MAP enforcement process that’ll kick your violators to the curb. Our system includes introducing your new policy to your sellers, contacting violators that we identify, measuring benchmarks, and regularly updating your network.

Definition of a MAP Policy

A MAP is defined as "minimum advertised price" (MAP). Meanwhile, a MAP policy is defined as a legal document used by brands to show the lowest price that a product can use for advertising purposes. However, in addition to MAP policies setting minimum prices for products, they also establish penalties for violating said minimum advertised price and what process should be used if a seller violates it.

MAP policies are meant to prevent the issue of price erosion to allow sellers the opportunity to lower their prices for the sake of competition. Because of the complexities associated with MAP policies, having an attorney helps when a seller wants to create one. This is because there is no one-size-fits-all MAP policy and every one should be tailored toward the seller’s unique needs.

Having a MAP policy is helpful for sellers regardless of whether they do business online, offline or both. It allows for more competitive pricing of brands but prevents retailers from setting prices lower than that described in their MAP policy to swerve more customers their way.

WHAT’S A MAP POLICY?

The minimum advertised price (MAP) is the lowest price that can be publicly displayed for a product on sale. A MAP policy is enacted by a brand to ensure their seller network doesn’t advertise their products below a certain price. As your product expands in distribution, you should benefit from increased revenue. But deep discounts and sales at the retail level can undercut your control over the amount of cash consumers pay for your goods.

Minimum advertised pricing (MAP) helps you compete by putting limits on the price offered by online and offline resellers. While retailers can charge whatever they want in-store, they can't lure new customers by advertising a price lower than the MAP. Want more info? We made this nifty infographic.

This sounds great, but as your business grows, it's increasingly tough to monitor the advertising of every retailer. You could put in the leg work yourself - but at great cost in time and dollars to your business. MAP monitoring offered by a third party is an economical and effective way to ensure MAP policy compliance.

We talk about if a MAP Policy is legal and the laws that surround it in another article.

Manufacturer's Suggested Retail Price (MSRP)

Manufacturer’s suggested retail price, also known as MSRP, serves as a guide for sellers and consumers alike to determine whether a price is appropriate for any given product. It is considered a list or sticker price, but sellers are not obligated to go with the MSRP for their products. At the same time, the MSRP is not the same thing as a minimum advertised price (MAP). This means that sellers are not legally bound to it; instead, it merely serves to allow sellers to communicate to potential consumers that this is the fair market value of their products. When products are sold at an MSRP, it’s often expected that the seller will offer some perks along with them. For example, if the product is a new TV, the seller might throw in a sounder or one-year subscription to a specific streaming service when selling at the MSRP to entice customers.

Unauthorized Sellers and Price Erosion

Impact on Brick-and-Mortar Stores vs. Online Retailers

Having a MAP policy prevents brick-and-mortar stores and online retailers from having to lower their prices to eliminate inventory. In terms of the impact on brick-and-mortar stores versus online retailers, it can protect both and help increase brand value. Online sellers cannot sell at a lower price than determined by the MAP policy so that they have a fair chance to be competitive in the market with similar products.

Benefits of a MAP Policy

Having a MAP policy provides benefits to sellers, consumers and even the market as a whole. Those benefits include protecting brand value, leveling the playing field for authorized sellers, enhancing retailer relationships, ensuring profitability, supporting brand perception, minimizing channel conflict, controlling online presence, increasing the market share for manufacturers and retailers and improving customer service and satisfaction.

Protecting brand value

Level Playing Field for Authorized Sellers

Authorized sellers can see their playing field leveled thanks to their MAP policy. Having a MAP policy allows them to stand out among a sea of sellers who are only out to make a quick buck through price erosion. This prevents authorized sellers from being left out and having their brand suffer and makes pricing fairer for everyone.

Enhancing retailer relationships

Having a MAP policy allows retailers to enhance their relationships with one another. This helps to eliminate unfriendly competition in the form of cheating, making pricing fair for consumers and preventing any one retailer from gaining an edge over another.

Ensuring profitability

Sellers who have a MAP policy are ensured of making profits as they allow them to stay in competition with other retailers with similar brands or products. By contrast, those without a MAP policy are forced to constantly reduce their prices far too low to be able to enjoy profitability.

Supporting brand perception

When a seller has a MAP policy, it helps support the perception consumers have of their brand. That perception is positive, which leads to better success for the seller as consumers are more likely to buy their products.

Minimizing channel conflict

A MAP policy can minimize channel conflict by discouraging erratic pricing differences among sellers. Instead, sellers can focus on working together in a peaceful way to build strategies that work for them. Instead of concentrating on constant pricing wars, they can focus on coming up with the best prices to benefit their business and their consumers.

Controlling online presence

Retailers who have a MAP policy are more easily able to control their online presence. This is made possible as distributors and brand owners are more open to authorized sellers meeting the right criteria for selling their products online.

Increased Market Share for Manufacturers and Retailers

Having a MAP policy in place increases market share for manufacturers and retailers. The manufacturer’s profits increase because they are encouraged to pump out more of their products while keeping prices competitive. Retailers also enjoy better market share by offering competitive prices that encourage consumers to shop around for the brands and products they love.

Improved Customer Service and Satisfaction

MAP policies lead to equal pricing among all authorized sellers of a given brand or product, which helps improve customer service. In turn, the consumer is satisfied in knowing that they are paying the fairest price for the product.

WHERE DID IT COME FROM?

A decade ago, the hurdle to selling online was a big one. It was a space reserved for the younger, less risk-averse, early adopter types. There were limited services targeting new retail businesses and existing brick-and-mortar shops wanting to make the switch online. You were on your own.

Yet, technology is an amazing thing that’s grown and developed quickly - almost too quickly. Now there are services like Shopify, Magento, eBay and Amazon storefronts that make selling online a breeze by removing the barriers to entry and by minimizing risk. Not to mention the many other peripheral and niche services specifically catering to online retailers. There’s no point in trying to fight the online world, but learn the ropes to work with it - the amount of online sellers is now too enormous.

As online retailers started to appear, they often resorted to discounting, promotions, and lower prices to get a leg up on competitors and stand out. They still do. It's become a game of how low can you go? This leaves little room to compete on anything other than price.

Because of this, brands and distributors often mistrust the online guys since they’re selling their products at lower prices. With the ability to compare products across the web and all the pricing intelligence software, the discounting will eventually spread through a brand’s seller network quickly. The problem is that the 'best price' business practice creates a race to the bottom and misguided sellers will ultimately erode a brand's image. There's no longevity.

Since it's now incredibly easy to put products online and discount, minimum advertised price (MAP) policies started to show up on the scene to control the downward spiral.

SOME FACTS ABOUT MAP PRICING

At first glance, MAP might seem to run afoul of antitrust laws. But courts consistently uphold these agreements, partly because retailers can charge whatever they want in-store. In addition, MAP arrangements are sometimes funded in part by the manufacturer, who provides compensation to retailers in exchange for advertising restrictions.

With the explosion of e-commerce, it's been difficult to define "advertised price." While a listing in an online store might fall under MAP, perks for shopping online, like per-transaction price cuts, are more of a gray area. In order to maximize its benefit, manufacturers need a clear MAP policy with the realities of online coupons and discount codes built in.

Both retailers and manufacturers have to uphold their ends of these agreements, making MAP policy monitoring necessary. Your business depends on MAP enforcement, since there's little to stop a new reseller from breaking a contract, either deliberately or because of sincere confusion about your MAP policy.

WHY DOES EVERY BRAND NEED A MAP POLICY?

A brand without a MAP policy is like peanut butter without jelly - the formula won't deliver the desired result. It should be part of your business’ online DNA. It’s the fuel that encourages your sellers to promote your products and drive consumers to pay for your brand name. It’s your first line of defense against protecting your brand and maintaining your profit margins.

Who doesn’t want to maintain profit margins?

Introducing and proactively enforcing your MAP policy indicates your long-term commitment and investment to your seller network. Oftentimes, brands forget that their sellers are their customers. Customers are the blood to your business, and anything other than putting your customers first will cause some major headaches down the road.

Just like any relationship, you need to put in the effort to strengthen your partnership - it’s not a one-sided thing. By simply saying “hey, we have you in mind 24/7”, you’re giving your sellers the confidence and reassurance that they will have adequate margins to invest in and educate themselves. In turn, they can advocate and sell your products with the right professionalism and competence. It’s a rub-their-back, rub-your-back kind of deal.

If you aren’t protecting your brand image and value, you’re destroying it. 

You’ve put in the blood, sweat, money, and tears to make, produce, and market your product and build up a brand name. Yet, it only takes a few sellers to take it all away.

Your financial success depends on your ability to recoup a healthy profit. Savvy sellers understand that they must maintain their profit margins to benefit from the groundwork that you’ve done. A MAP policy ensures that your sellers follow best practices and avoid eroding your brand’s position within the market, so everyone in your network can win.

Just like any team, your brand equity is only as strong as the weakest link within your business. Sometimes, breaking up with bad sellers is your best bet.

WHEN TO GET OUTSIDE HELP

If your business is growing, you might be reluctant to invest in MAP policy monitoring software and services from an outside provider. Third-party MAP compliance is increasingly affordable, however, at moderate cost to your small- or medium-sized business and scalable as you grow your market share. Make sure you find a company that meets all your monitoring requirements.

MAP violators cost you big time. In addition to wasting any money you've provided to fund an advertising restriction, lack of MAP policy compliance sends a bad message to consumers. If your end users come to believe your product is only worth a deeply discounted price, they will never pay more.

WHAT TO LOOK FOR IN MAP COMPLIANCE

Once your brand is out there in the marketplace, you want to monitor all elements of its image. That includes how much it costs. After all, your ideal price point is a number carefully chosen to appeal to your target market. An unauthorized price slash by a retailer can appeal to an entirely different demographic, damaging your marketing strategy. That's one major reason manufacturers implement MAP policies.

Fortunately, with third-party MAP monitoring, you do not have to spend hours scouring e-commerce sites or searching for online versions of paper flyers to confirm whether resellers are keeping up with their obligations. MAP monitoring can be done through a cloud-based, software as a service (SaaS) platform. The right partner can search for violators and inform them of a breach, and a comprehensive database can track seller history, so you know who is repeatedly trying to get around the MAP agreement.

TRADE VITALITY'S COST-EFFECTIVE SERVICE

Trade Vitality offers monitoring, notification and database services in a user-friendly platform. You don't have to spend hours tracking your sellers; our software does much of the heavy lifting. With a few clicks, you can notify violators that you've spotted an infraction, satisfying the first step of enforcing your legal rights under the contract. Best of all, you're protecting the people who buy your product from unpredictable price fluctuations.

MAP is especially complicated in the age of e-commerce, but our platform offers comprehensive, high-quality data. You won't have to worry about ruining a relationship with a valued retailer because of a misunderstanding. If we report a violation, you can have confidence in the reliability of our data. That reliability is the result of not just our technology, but also of the real-life human beings who review all of that data. Our people provide a valuable second-check of anything our platform may find.

What Trade Vitality does is unlike other agencies because of our secret sauce. No one but our clients has access to the unique technology that calls out signatures of MAP violators. That technology is supported by a dedicated team of people who are on your side - keeping the secret sauce up to speed and your platform working smoothly.

Even better, Trade Vitality's product comes at a price you can afford. Instead of hiring someone to monitor for MAP violations or spending your precious time keeping up with your resellers, you can rely on our team. You can then focus on expanding your distribution channels and satisfying customer demands.

TAKE ACTION

MAP Pricing policies are an excellent tool to help you manage and maintain your product brand. Compliance should not be a headache. Contact us to learn how Trade Vitality can give you the benefit of MAP enforcement for a modest investment, and maximize your business returns.

HUNGRY FOR MORE?

It’s the bread and butter to every successful MAP policy: a consistent, repeatable process. Catch our second post of this two-part series where we dive into how to start MAP monitoring in 30 days.

Frequently Asked Questions

What Is the MAP Price?

The MAP price is the minimum advertised price that retailers are permitted to advertise products for sale. It is set by the manufacturer and ensures that retailers do not advertise products lower than the set price.

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

A MAP policy in the U.S. is the minimum advertised price that sellers are allowed to advertise products and brands at both online and in physical stores. It also explains penalties to be imposed if a seller violates that minimum advertised price.

What Is a Product MAP?

A product MAP includes a variety of information on specific products so customers can learn more about them. This includes the price by which they are permitted to be sold.

What Is the Definition of MAP?

The definition of MAP is “minimum advertised price.” It pertains to products or specific brands to show consumers what they can expect to pay. It also tells sellers how much they’re allowed to price products while keeping things competitive but not negatively.

What Is the Full Form of MAP?

The full form of MAP is “minimum advertised price” for products and their pricing.

Is MAP Legal in the U.S.?

MAP is legal in the U.S. per antitrust laws. MAP policies have also been in place since 1919.

Is MAP Pricing Legal?

MAP pricing is legal under U.S. antitrust laws.

How to Calculate MAP Pricing

MAP pricing can be calculated by reducing the current manufacturer suggested retail price (MSRP) by 20%, for example. Retail price can even be used.