map pricing
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Some things are better understood with examples and other things are best learned through experience. Not having a MAP policy can sometimes be a hard lesson to learn.

Its effects are usually not felt until it may be too late. This is why being preemptive in terms of your MAP policy may be the best course of action.

A MAP policy is a legal document that protects brands, sellers, and consumers from price erosion, which reduces the perceived value of a product, reduces sellers’ margins, and makes it difficult for consumers to spot fraudulent sellers and copycat products. A MAP policy also defines the consequences for violating the minimum advertised price and the process a brand will follow to enforce it.

The world of retail has numerous kinds of pricing policies, so sometimes it’s hard to know what policies you need and why they’re valuable.

In this guide, we’ll cover:

  • What sets MAP pricing apart from other policies
  • When you need a MAP policy
  • How to establish a MAP policy
  • How to enforce your MAP policy
  • How to maintain your MAP policy

For starters, let’s look at what makes MAP pricing different.

What makes MAP different from other pricing policies?

MAP specifically addresses the price a retailer publicly displays, and it doesn’t address the price a product is actually sold for. This helps brands protect the perceived value of their products (because consumers should never publicly see a price below this point), while still giving sellers the flexibility to privately negotiate lower prices with individual customers.

  • MAP vs MRP or UPP
  • MAP vs MSRP
  • MAP vs ADP
  • MAP vs RPM
  • MAP vs iMAP or eMAP

MAP vs. MRP or UPP

It’s not as comprehensive as a “minimum retail price” (MRP)—also referred to as a “minimum resale price”—or a “unilateral pricing policy” (UPP). These terms refer to a policy which defines the lowest price a product can actually be sold for, not just what it can be advertised for.

MAP vs. MSRP

Unlike a “manufacturer’s suggested retail price” (MSRP), a MAP policy is not a suggestion, and brands can legally enforce their MAP policy if a seller violates it. What that enforcement looks like and how severe the consequences are, depend on what the brand has outlined in their MAP policy.

MAP vs. ADP

An “authorized dealer program” (ADP) is another term frequently used in conversations about pricing, but it’s not actually a pricing policy. An ADP is designed to explicitly define which retailers are allowed to sell a brand’s products. Sellers who aren’t part of the ADP need to apply and get approved by the brand before they can carry the brand’s products.

An ADP is typically used in conjunction with one of the pricing policies above. It plays a crucial—and related—role in helping manufacturers protect their brand integrity.

While a MAP policy doesn’t say who can sell and who can’t, it should outline how a brand will penalize sellers who violate the MAP policy, and it will often provide a legal process for terminating seller relationships if a retailer continues to abuse their pricing.

MAP vs. RPM

Retail price maintenance (RPM) is sometimes used to refer to a broader pricing policy like an MRP or UPP, but this term is better used to discuss how a brand actually maintains its pricing policies.

Regardless of the kind of pricing policy you use, RPM is an essential part of the process—in fact, without it, your policy doesn’t really even matter. If you don’t enforce your pricing policy, violators have little incentive to follow it, and all it takes is one bad influencer to drag your other sellers down (they have to violate your policy too, in order to compete).

This is why it’s important for a good MAP policy to explicitly outline how it will be enforced. But brands also need to know who, specifically, will be doing the enforcing. (It’s a full-time job, and it’s not for an entry-level employee.)

MAP vs. iMAP or eMAP

You’ll sometimes hear someone refer to an Internet minimum advertised price (iMAP) or electronic minimum advertised price (eMAP). An iMAP is specific to prices advertised online, but an eMAP includes all electronic communication channels—even text messaging.

MAP pricing is broader than these two policies, and covers all print, physical, and digital channels a retailer may use to list pricing.

Many of these acronyms and terms are used interchangeably, but they actually refer to specific policies and processes, and their distinctions are important.

When do you need a MAP policy?

The biggest reasons to establish a MAP policy are to protect your price and get rid of harmful sellers. Without a formal pricing policy, you may have:

  • Too many sellers in one marketplace
  • Too many unknown sellers
  • Too much variance in pricing
  • Complaints from your best retail partners

A MAP policy helps you correct these issues by notifying sellers: keep your price at this number or above, or else. As you enforce your policy, brands that don’t fall in line may lose the ability to sell your products (assuming that’s one of the penalties you’ve outlined in your policy), and over time, you’ll be able to put more trust in your retailers—because only the good ones will remain.

When there are too many sellers in one marketplace, it’s inevitable that one of them will violate your pricing. It’s the only way for the lesser-known sellers to stand out and get ahead. This triggers “race-to-the-bottom” pricing, where other sellers have to lower their prices, too, or else they’ll lose sales.

A similar thing happens when there are too many unknown sellers, but it happens for a different reason. These sellers have no relationship with you, so they don’t care about honoring your brand, and they have no reason to fear retaliation from you. They don’t see consequences for lowering your price, so they lower it, and thus trigger the race-to-the-bottom.

Your good retail partners—the ones who believe that the best representation of your brand is also best for them—will likely complain about sellers who frequently play games with pricing. If good retailers don’t drop their price, too, they lose sales. If they do drop their price, they reduce their margins. It’s not a good spot for them to be in, so they’ll probably ask you to do something about it.

(That’s where your MAP policy comes in.)

How do you establish a MAP policy?

Writing and formalizing a MAP policy is a complex legal process, and you need to work with a lawyer. You’re creating a legal document which outlines the steps you’ll take to penalize or even terminate a seller. Mishandling your response to pricing violations can easily result in a lawsuit—so you need to get it right.

A lawyer will help you:

  • Write the policy succinctly
  • Clearly define appropriate penalties
  • Protect you from misusing the policy
  • Define what is or isn’t a violation
  • Outline how you’ll handle “false positives” (when an error makes it appear that a seller has violated your policy)
  • Explain how you’ll handle appeals

When you start penalizing sellers for violating your MAP policy, they’re going to start contesting whether the violation occurred or if it was really their fault. You can’t show any favoritism, so you need to make sure you apply every piece of your policy consistently.

It might be tempting to just use a boilerplate policy you found online, but this isn’t a document you want to create from a template. It’s personal to your brand. You have to be able to actually enforce it, or it won’t make a difference. That means you need to choose the right penalties—and the right number of penalties—so that it gives your retail partners flexibility. (Remember: you want to keep the good ones!)

You should ask:

  • What are the problems we want to address?
  • Who is causing these problems?
  • What are the processes we need to have in place to fix these issues?

Your MAP policy should be unique to your specific problems and goals. A lawyer will help you craft a policy that makes sense for your brand—and that can evolve as your needs grow and change.

It’s also worth including your retailers in parts of this process. They’ll be able to help you identify problem SKUs and the frustrations your MAP policy could help address. Good retail partners like MAP policies, because these documents protect them from rogue sellers, too.

In total, you should expect it to take at least three months to create your policy—but depending on the scope of your problems, how well you understand them, and the scale of your organization, it could take much longer.

If you’ve never had a MAP policy, you should start small. Write a standard reseller agreement where people have to identify everywhere they sell online (for instance, they may sell on their website as well as through another name on Amazon), and take the time to investigate your pricing-related problems.

How do you enforce a MAP policy?

If you don’t enforce your MAP policy, your “minimum advertised price” becomes little more than a suggestion. There are no consequences for violating it, so sellers will have no problem ignoring it—and once they do, your good retailers will, too.

When it comes to enforcing your policy, there are some questions you need to answer:

  • How will you know when a violation has occurred?
  • What do you have the capacity to enforce?
  • Who will do the enforcing?

How will you know when a violation has occurred?

It would be incredibly inefficient to try and manually track all of your SKUs in all of the places they appear—especially online. That’s why most brands use software solutions like MAP Guard to monitor their SKUs across the web. These tools automate the process of finding violations, so all you have to do is decide how to respond to them.

However, not all price protection software is the same. Some price protection software is pretty easy to “trick,” because it only pulls pricing information on specific days or at specific times—so sellers have a window in which they can manipulate their pricing without raising any alarms. That’s why MAP Guard retrieves pricing information several times a day at unpredictable intervals, ensuring you’ll catch as many violations as possible.

Then it’s up to you to decide what to do with that information.

What do you have the capacity to enforce?

Unfortunately, if you have a large product catalogue and lots of online retailers, in a single day you’ll likely rack up more pricing violations than you have time or energy to respond to. In most cases, you’ll need to prioritize the SKUs and violations that are doing the most damage to your brand, and leave the rest. (We recommend focusing on the top 10 percent of your SKUs.)

That may sound crazy, but there are a few things to consider:

  1. As you enforce your policy on your most prominent SKUs, sellers will take notice, and they’ll be less likely to violate your other SKUs.
  2. You don’t have to notify a seller of every SKU they’re violating for them to be held legally responsible for correcting every violation.
  3. If numerous sellers are violating the price of your most important SKUs, why would you waste time enforcing minor violations of minor SKUs?

Ultimately, enforcing your MAP policy is about driving down future violations as much as it is about correcting current ones. You can’t possibly enforce every violation, but you can eliminate the sellers who violate your policies the most, and you can make everyone feel a lot less comfortable abusing your prices.

And again, what exactly your MAP policy enforcement looks like will depend on the penalties and processes you and your lawyer defined in your policy. It all needs to be determined in advance and formally documented, so no matter who enforces your policy, it’ll be handled the same way.

Who will do the enforcing?

Enforcing your MAP policy is not an entry-level position, and it’s not a responsibility you should hand to an intern. This is a job for someone who values your brand and understands the impact of pricing violations. (And it’s definitely a full-time job.)

In a single day, your MAP policy enforcer will likely have more violations than they can follow through on. So this person needs to be able to prioritize the violations that harm your brand the most. They’re also likely going to build relationships with your sellers (some positive, and some negative). So who do you want to be the face of your brand in these situations?

How do you maintain your MAP policy?

A MAP policy isn’t something where you can “set it and forget it.” It takes months of work to develop your policy, it’s a full-time job to enforce it, and it will need to evolve with your brand.

It’s like the difference between reaching your weight-loss goal and maintaining that weight goal long term. You don’t want to put in all that work, then return to your previous habits and let things slide back to the way they were before.

Your pricing policy will change over time. As new products come to market, you’ll need to decide if they’ll replace SKUs on your prioritized list, or if you’ll simply add them to that list and gradually enforce more SKUs.

You’ll also need to ask periodically:

  • Are there new problems you need to solve?
  • Are the SKUs you decided to enforce still the most important?
  • Do you have more capacity to enforce violations on more SKUs?

Your MAP policy isn’t set in stone. It’s not static. It’s a dynamic document that evolves with your brand. So be sure that as your brand grows and changes, you take time to ensure that your MAP policy does, too.

 

Protect your price

A MAP policy is an essential part of protecting your price and maintaining your brand integrity. But if you have a large product catalogue and numerous retail partners, it’s hard to keep track of every SKU, everywhere.

Are MAP Policies Legal?

At first glance, the implementation of MAP policies in the first place might seem a bit shady – if not downright illegal.

Simply stated: MAP policies are perfectly legal. There’s no loophole, technicality, or anything like that; MAP policies simply do not violate the law.

That said, the implementation of MAP policies are not to be confused with instances of price fixing – which is illegal.

To illustrate the difference between MAP policy and price fixing, let’s look at a few examples:

  • Company A, B, and C are direct competitors that sell the exact same products. Company A contacts Company B, and they both decide to lower the actual (not advertised) price of a specific item.

In this scenario, Company C is put at a disadvantage due to an inside agreement between Companies A and B. This is considered horizontal price fixing, and violates federal antitrust laws.

  • Companies A, B, and C all sell electronic equipment. They communicate with each other, and agree to all sell a specific TV model for the same (increased) price.

Again, any company other than A, B, or C is at a disadvantage. Worse yet, if A, B, and C are the only retailers who sell the TV in question, consumers who wish to purchase said TV are forced to pay the increased price.

  • Manufacturer X sells its products to Retailers A, B, and C. The manufacturer contacts Company A, allowing said company to sell its products for lower than the price the manufacturer agreed upon with B and C.

This is an example of vertical price fixing, and is also a violation of federal antitrust laws.

The essence of MAP policies, as we said earlier, is that the manufacturer acts alone in its determination of how much its products can be advertised for. There’s no unequal treatment among the supplier’s retail partners; they are each required by the supplier to follow the same exact policy. And, again, the retailers are free to sell the supplier’s products for however much they wish; they simply can’t advertise the products for less than the agreed-upon minimum advertised price.

(As a quick aside, it simply makes sense that a manufacturer or supplier is legally allowed to determine the price of its own products.)

Before moving on, we definitely need to point out that retailers that violate an agreed-upon MAP policy can face legal consequences – albeit in a roundabout way.

When a retailer violates a MAP policy (i.e., advertises a product for less than the agreed-upon price), the supplier can typically take the following actions:

  • For a first offense, the supplier will send a written warning to the retailer
  • If the retailer doesn’t comply, the supplier will simply stop doing business with the company
  • If the retailer doesn’t comply – and still has the supplier’s products stocked in inventory – the supplier can file a cease and desist order
  • If the retailer still doesn’t comply, the supplier may decide to take legal action

Note, however, that MAP policies are not legally binding. In other words, retailers who violate these agreements are not breaking the law; they’re simply breaking a non-contractual agreement. That said, if the situation warrants, the supplier may decide to dig into other areas of the partnership that are under contract – and stop at nothing until the retailer either abides with the policy or agrees to sever ties.

MAP vs. MSRP

While a product’s MAP and MSRP are related to one another, they aren’t synonymous.

While MAP is, again, the lowest price at which a supplier requires retailers to advertise a product for, the product’s MSRP is its Manufacturer’s Suggested Retail Price.

Earlier, we mentioned in passing that, when defining the minimum advertised price for a product, suppliers essentially consider how much they believe the product to be worth. The product’s MSRP, then, is the price at which the manufacturer believes it should be sold by retailers.

(To quickly illustrate the difference between both terms, a manufacturer might believe a product to be worth $10. Knowing that retailers will obviously want to profit from selling the product, the manufacturer might then determine the product’s MSRP to be $12.)

Now, a product’s MSRP is merely that: a suggestion. There’s no agreement – contractual or not – between suppliers and retailers regarding MSRP. When suppliers determine the MSRP of a product, they’re simply making an in-house decision that contributes to their definition of the product’s MAP.

(Another quick aside: By today’s standards, MSRP is a bit “old hat” due to a number of factors, such as dynamic pricing and personalized offers. At any rate, MSRP isn’t all that useful for retailers, so we don’t need to dig much more into it.)

Effects of MAP Policies on Online Retailers

Now that we have all the logistics of MAP policies hammered out, it’s time to answer the burning question:

How, exactly, do MAP policies affect the way in which ecommerce companies do business?

With everything we’ve said so far, it’s easy to assume that MAP policies only benefit manufacturers, and basically restrict retailers from implementing certain pricing strategies.

Remember, though: MAP policies merely dictate the price at which a retailer can advertise a given product; they can still sell it for as low a price as they want.

Additionally, as we said, MAP policies are uniform for all retailers selling a given product. That said, the “restrictions” set by the policy don’t equate to competitive disadvantages; they actually place each retail company on equal footing.

At any rate, let’s quickly run through the ways in which MAP policies do affect ecommerce retailers.

First and foremost, the definition of “advertised price” encompasses a wide range of areas – especially for retailers operating primarily (or solely) online.

The following are examples of instances in which MAP policies are required to be followed:

  • Google Shopping results
  • Landing pages
  • Product comparison pages
  • Product pages

(For comparison, in brick-and-mortar stores, the shelf price of an item is always the item’s actual price. However, for online stores – where the product page acts as a “virtual shelf” – the price shown must be the minimum advertised price.)

But, again, if you’re advertising a product for the lowest amount possible, and your competitors are doing the same, you’re not at a disadvantage – at least as far as pricing goes. Which brings us to the next point…

If your advertised price for a product is the same as your competitors’, you’re going to need to find another way to stand out to your target consumer. This isn’t a bad thing; in fact, it’ll almost certainly lead to your providing additional value to your customers in a way that’s much more unique than simply offering bargain-basement prices.

On the other side of this same coin, you also won’t need to worry all that much about being undercut by your competition. With a pricing war all but taken out of the picture, you’ll be better able to focus on providing the aforementioned added value that will make your company stand out.

Another thing to consider is the fact that, by following a supplier’s MAP policy to a T, you’ll inherently strengthen your business relationship with the company in question. Needless to say, a positive relationship with your suppliers is simply good for business.

Looking at things a different way, if a competing company who works with a common supplier neglects to follow the supplier’s MAP policy, it may cause the supplier to cease doing business with them. It goes without saying, of course, that having one less competitor can provide an opportunity for your company to grow.

So, while MAP policies may at first seem a bit restrictive for retailers, they’re actually beneficial in that they spur retail companies to maintain a sense of trust among their suppliers, and to provide maximum value to their customers in a variety of ways.

“Getting Around” MAP Policies

After what we just said about being honest with your suppliers, that heading probably came as a bit of a shock.

But, once again, remember:

MAP policies dictate the price at which you can advertise a product. You can set the actual price of your products however you like.

(Again, though: there’s a fine line between “advertised price” and “actual price” when it comes to ecommerce.)

That said, let’s go over some of the ways you can satisfy your suppliers’ MAP policies while also offering your products at a price your customers can afford.

Your first option is to hide the true price of your item until the customer has added it to their cart.

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In the example above, the website lists (what’s assumed to be) the minimum advertised price of the product. Once the customer adds the item to their cart, they’ll be provided with the actual price of the product.

(Note: Regarding ecommerce, landing pages, product pages, etc. are considered advertorial in nature, while checkout pages are considered transactional. Therefore, once a customer reaches the checkout page, the retailer can display the actual price of the product being purchased.)

If you’re going to go this route, we’d advise that you opt to display the MAP, as opposed to not displaying a price at all. Reason being, you’ll almost certainly lose out on a ton of business from potential customers who simply don’t want to go through the extra step of adding the product to their cart in order to see how much it costs. By providing the MAP, you’ll at least give your customers a ballpark idea of the cost of the product in question.

You may also choose to provide visitors to your site with a coupon or discount code on your main page (or subsequent landing pages). Similarly, you might opt to provide a “buy one, get one” offer (or any variation of the sort).

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However, to adhere to your supplier’s MAP policy, such offers can’t be product-specific. In other words, the offer must apply storewide (or, at the very least, to a specific category of items). It also must be clear that your retail company is extending the offer – not your supplier. Again, this goes back to the notion that MAP policies are meant to avoid instances in which a manufacturer’s products appear cheap in the eyes of the consumer (or other retailers, who may reconsider doing business with a manufacturer if they perceive their products to be poorly-made).

Similar to providing discounts, online retailers can also opt to provide free shipping to customers – either immediately or after they reach a predetermined threshold.

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In compliance with MAP policy, it’s crystal clear that the retailer is offering free shipping as an additional service – which has no bearing on the perceived value of the product(s) being purchased.

Overall, while you can use the aforementioned strategies to indirectly advertise lower prices for the products in your catalog, you want to avoid pointing out specific products as much as possible in doing so. Again, your goal is to simultaneously satisfy your supplier’s MAP policy and attract potential customers by promising affordable pricing.

via How MAP Policies Can Affect Your Pricing Strategy – and …

 

here they appear. And even with good resellers, you’re bound to have more violations in a single day than you can possibly follow-up on.

via The Complete Guide to MAP Pricing | PriceSpider

 

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