What is MAP Pricing?

What is MAP Pricing?

In simple terms, minimum advertised pricing, or MAP Pricing, is the lowest price at which a retailer is allowed to advertise a product for sale. Mega marketplaces like Target, Amazon, and Walmart tend to enforce MAP prices because of the rampant competition between retailers, high stakes, and low prices. However, this is not always easy to do because sellers have to impose MAP agreements themselves and ensure that resellers adhere to them.

If you own a business and work with resellers, read on to find out what MAP pricing is, what it means to your company, and how you can enforce it.

What Is MAP Pricing?

MAP pricing refers to the practice of setting a minimum amount below which a reseller cannot advertise your product, otherwise called a MAP price. For example, if you own a shoe company and set your MAP price at $1,200 for your bestseller, all resellers (online and physical stores) can only advertise this product at $1,200 or more. If a reseller advertises the shoe for $1,000, they will have violated your company’s MAP agreement.

Note: The MAP price is not the lowest price at which a reseller can sell a product. It is the lowest price at which they can advertise it, which means they can sell it at any price they see fit.

Is MAP Pricing Legal?

Yes. MAP pricing is legal in the United States under antitrust statutes. The legality in the US is based on the fact that MAP pricing only covers advertising price and does not dictate the selling price for the retailer. It is designed to protect product manufacturers and service providers, not harm the retailer.

Consider a manufacturer that sets the MAP price for their product as $1,000 and a reseller who advertises it at $500. This situation sends consumers the message that the manufacturer’s prices are inflated or too high, convincing them to never buy the product at $1,000. With time, the manufacturer’s product will fall in value, and their brand will be eroded.

Note: MAP pricing might not be legal in other regions, which can present a problem for companies that operate internationally.

What Is the Purpose of MAP (Minimum Advertised Price) Agreements?

The primary goal of MAP pricing is protecting a manufacturer’s brand identity through advertising regulations. Consistent advertisement pricing sends the message that a brand has value. When a given line of products is always available online or in-store at a set price, it appears more valuable than one that varies in price from store to store.

MAP pricing is crucial in stores and marketplaces like Amazon, where prices are very important to consumers. As a practice, it does the following:

  • Protects brand identity and product value
  • Fosters fair competition among resellers and distributors
  • Prevents product underpricing
  • Gives smaller retailers a fighting chance against large retailers
  • Protects seller margins

How to Stop Current (Minimum Advertised Price) MAP Violators

While MAP agreements certainly have their benefits, some resellers violate them. Violations are especially challenging to handle on Amazon because it does not play an active role in enforcing pricing agreements. Manufacturers have to address the matter with the reseller by:

  • Identifying violating resellers
  • Sending them a message to enforce MAP prices
  • Reminding them of the repercussions of violating the MAP agreement
  • Giving them one warning
  • Banning them if they don’t comply
  • Contacting Amazon if they fail to respond

If you have a MAP agreement in place, you must monitor all distribution channels regularly to ensure it is being followed.

What If You Don’t Have a MAP Agreement?

MAP agreements are one of the best ways manufacturers protect their brand identity and product value. So what happened when there is no MAP agreement in place? Essentially, a manufacturer has very little authority to enforce MAP prices without the support of a signed agreement. However, they still have the power to terminate unauthorized listings from retailers – even in the absence of an agreement – if they can prove their case to Amazon.

If you are dealing with a violating retailer, you can send the following information to Amazon:

  • Your order ID
  • The ASIN/ISBN of the product’s title and the detail page
  • A concise explanation of the violation
  • The seller’s store name

If Amazon verifies your claim, the retailer can have their selling privileges revoked and receive legal notices for copyright infringement.

MAP Pricing Vs. IMAP Pricing

MAP pricing and iMAP pricing are not so different from each other. iMAP is simply a type of MAP policy specially designed for products that are only sold online. Generally, iMAP policies focus on e-commerce marketing while traditional MAP strategies are built around offline advertising avenues like newspapers and catalogues. That said, most MAP policies cover both online and offline marketplaces, which is why the two are not very different.

MAP Pricing Vs. MSRP

Manufacturer Suggested Retail Price (MSRP), also known as RRP (Recommended Retail Price) or SRP (Suggested Retail Price), is the value at which the manufacturer believes a product should be sold. MSRP differs from MAP price in that the latter is a regulation on the advertising price while the former is a recommendation on the selling price of the product.

To help you understand, consider a product that cannot be advertised for lower than $400 but can be sold at a $350 discount. $400 is the MAP price, while $350 is the MSRP.

Pros and Cons of MAP Pricing

Pros

  • MAP agreements protect brand identities and perceptions
  • They create a standard price expectation across all marketplaces
  • They regulate advertising without affecting the reseller’s sales
  • They protect retailer margins by creating a floor below which resellers cannot go in a race to outdo each other. This could lead to plummeting sales and losses.

Cons

  • MAP pricing limits the control retailers have overpricing
  • Because they are mainly used in the US, they can create administrative problems for companies that operate internationally.
  • It influences the competition.

How to Enforce Map Pricing

Enforcing MAP pricing is a two-pronged approach: you must monitor agreement violations and act on them immediately.

  • MAP Pricing Monitoring. Monitoring MAP prices allows you to identify resellers that are not adhering to the agreement. You can use pricing intelligence complete with automated data collection to track these prices across different marketplaces and identify violators.
  • MAP Enforcement. Once you identify violators, you can refer to your MAP policies, which will usually dictate the method of enforcement. Because a MAP agreement is a binding contract between you and the reseller, you can enforce or retaliate under US law. Common consequences of violating MAP pricing include:

    – Being excluded from future promotional deals
    – A timeout during which the reseller will not receive products from the brand
    – Partnership termination

Final Thoughts

The market has conflicting views concerning MAP Pricing. While it protects brand identities and perceptions for manufacturers, it might also influence the competition among retailers. Nonetheless, MAP prices are crucial to product manufacturers, and you should understand and utilize them if you own a company. The policies can significantly affect your marketing and pricing initiatives and brand growth.