MAP pricing: The definition, policy and its benefits for your online business
E commerce is expanding with more and more business. As a result, it’s become more difficult for brands to control over the price of retailers. Then, MAP pricing appears to solve this issue. We will deliver you further information about it.
But first, we must know what is MAP pricing
What is MAP pricing?
MAP stands for Minimum Advertised Price. Just like the name, this is the lowest price that retailers are allowed to advertise.
For example, a brand sets MAP pricing of a product at $100. Then, all stores, both online and offline, must advertise this product at $100 or more.
If any stores set the price lower than $100, they violate the company backpack’s MAP agreement.
However, this doesn’t mean you must sell this product at $100 at your store. You must advertise the product at the price of $100, but totally can sell it at $75 at your store.
MAP pricing policy
You should know that MAP pricing is a one-way policy. Thus, manufacturers will set the price, and retailers have to follow. There won’t have any pricing arrangement between a manufacturers and retailers. Therefore, if you violate this policy, it’s won’t be illegal. However, producers can penalize you. For example, withdraw or limit the distribution.
MAP vs MSRP
Now, let’s come to another common term of pricing: MSRP. MSRP stands for Manufacturer’s Suggested Retail Pricing. It is the price manufacturers recommend for retailers.
You might confuse between MAP and MSRP. However, MAP pricing is very different from MSPR. One of the main difference is their policies.
MAP is the lowest price that retailers can advertise their products outside the store. While MSRP is the price suggested by operators for retailers
As you can see, with MAP policy, there’s strict limit pricing. If you advertise the product at lower price than MAP, manufacturers can penalize you by withdrawing or limiting the distribution.
On the other hand, with MSRP, there’s no limit. Retailers will have more option to set their price. Moreover, they have the recommended price from manufacturers. Thus, they will be able to set the right price.
For example, MSRP for a computer is $1000. Then, retailers can advertise it with 25% discount. As a result, customers will get this computer with only $750. In case of MAP pricing, this won’t happen
Why you need MAP pricing for your online business?
Establish fair competitions
Customers are always seeking for the best price. Therefore, retailers often offer discount or promotion. This can lead to a pricing war if every store tries to lower the price. Sometimes, retailers are willing to set the price even lower than wholesale pricing to attract more customers. This is when MAP comes in
With MAP, there’s a limit for retailers. They can drop the price too low and therefore, create a fair chance for every competitors.
Keep the brand value
As a manufacturer, you don’t need to worry about high price too much. When seeing an expensive good, people often assume it expensive for a good reason. This is psychological pricing. However, when retailers lower the price too low, even lower than wholesale pricing, there will be problems.
People believe that low cost often comes with low quality. If your products are cheap, surely there will be more traffic. However, buyers will assume your product isn’t that valuable. This can greatly affect brand image.
Therefore, MAP pricing is a great method to maintain your brand image
As a manufacturer, MAP pricing can keep you competitive
MAP pricing can limit the discount of retailers. Thanks to small difference in pricing with retailers, distributors stores or websites can still attract buyers. Therefore, manufacturers can still remain competitive
Find valid retailers
The e commerce is expanding, thus it’s hard to monitor all retailers. With MAP pricing, you can cancel contract with retailers who violate the policy.
This will not only benefit manufacturers, but also retailers. First, your brand’s image and value will be protected. Also, the reduction of competitors will be a blessing to retailers as well
Having more offline retailers
For online retailers, the expenses is not as high as those offline. Brick-and-mortar stores have to afford rent expense, depreciation and so on. As a result, the pricing of offline store often higher than online ones. Then, if online store continue lowering the price, brick-and-mortar stores hardly can compete with them. Therefore, they can be frustrated and don’t want to sell your products anymore.
MAP pricing set the limit to every discount and promotion. Thanks to that, it create equal competition for every store, from small to big store, online to offline store. Thus, your products will be more appealing to many store.
For every business, MAP pricing is very important. It’s not only the sight for retailers to set price, but also help maintain good relationship with the brands. Therefore, you shouldn’t violate this policy
To avoid any issues to your online business, we recommend experts in e commerce, such as ArrowHitech.
ArrowHitech, with 12+ years in e commerce, can grant you useful advice for your online business. We can grant you the best service from consulting to developing website. Also, our company sell and develop Shopify themes and Shopify apps as well. Working with our decade-long experienced developers, you surely will get your dream website. Contact us here or via email firstname.lastname@example.org or hotline +84 243 7955 813