2024 Guide to Map Pricing | What is a MAP Price?
What in the world of e-commerce is MAP pricing?! MAP is an acronym that stands for minimum advertised price. And the point of a MAP price? Well, as any consumer will probably know, the online marketplace is completely saturated. There are tens of millions of online sellers throughout the world. Choosing which brand of ketchup to buy has never been more challenging! But that’s not the only issue.
As the quantity of online sellers grows, so does the difficulty of drawing customers to make purchases from those retailers. The natural response to this level of competition is to lower prices. Perhaps that’s just how marketplace competition goes, but it certainly can harm the consumer, the retailer, and the owner of the brand.
In order to mitigate the damage caused by offering discounts, manufacturers have developed an effective strategy. This is MAP pricing.
The MAP price informs a given brand’s retail partners of the minimum price they can apply to a product. For sure, a retailer can sell a product at any price they see fit. However, if the retailer wants to continue having a working relationship with the manufacturer, the sticker price on a product can’t be less than the MAP price.
How Does MAP Pricing Protect the Consumer, Retailer, and Brand?
Just how does MAP pricing protect the consumer, retailer, and brand? Essentially, MAP price establishes a baseline for stable profit margins, which encourages manufacturers to keep making good quality products, instead of cheaper stuff to stay competitive. As a result, the retailer can operate in a more fair commerce environment, whether online or in a store. Without a stable profit margin, the retailer can put pressure on manufacturers to cut the wholesale cost. That can lead to a degradation in product quality. When a brand doesn’t cut the price for retailers, they’ll potentially not carry those goods. Whichever way it plays out, ultimately the consumer is stuck with a slimmer selection of lower quality products. That’s not fun at all!
After a manufacturer determines its MAP price policy, they forward the policy to the authorized resellers they work with, and then decide on what happens if there’s non-compliance. A lot of the time, brands have a sort of “three-strike” policy. Just like it sounds, if the retailer fails to uphold the MAP price policy after two warnings, the brand won’t keep them on their roster of accounts any more. Best to stay compliant!
MSRP vs MAP Price | Protecting Your Brand | Dealing With Non-Compliance
You’ve probably heard of a Manufacturer’s Suggested Retail Price (MSRP). How’s an MSRP different from a MAP price? To a degree, the MSRP is arbitrary and serves to indicate value. It’s a way for a brand to inform consumer perception about a product. The higher the MSRP, the higher the value in the eyes of the consumer. An MSRP also functions to tell retailers their possible profit when they buy the product wholesale.
If a brand chooses to set a MAP policy for its products, they’ll then have to figure out the specific products it applies to. Sometimes, manufacturers use the MSRP for the MAP price. Other times, brands will make the MAP price a bit lower than the MSRP. It all depends on the policy! The penalty for non-compliance is also up to the brand. The goal is to protect equity and profit margins, so a manufacturer may want to issue warnings or they can terminate an account after one incorrect action by the retailer. There’s also the option of MAP enforcement on a product basis instead of across an entire catalog of products.
Hire a Lawyer to Write Your MAP Policy!
Regardless of what a brand decides to do with their MAP policy, they should strongly consider hiring a lawyer to write the policy for them! Many folks check out the MAP policies of their competitors – that’s a solid way to get an idea of what you may or may not want to include. But copy-pasting someone else’s policy for your business is probably not the best way to go. Just like every brand is unique and distinct, the MAP pricing policy should be, too. Overall, the MAP pricing policy should convey the brand’s values and tolerance of risk.
In reality, lots of brands claim to have a MAP pricing policy, though they don’t exactly enforce it. If a brand isn’t enforcing the MAP policy, they might as well not even have one. Credibility can be impacted and the brand can open itself up to legal issues. MAP price policies are effective if enforced and can legitimately protect a brand. That is, protect the brand within the realm of its authorized sellers. For unauthorized sellers who infringe on a company’s intellectual property – MAP doesn’t apply. In that case, you’d have to look into filing a federal lawsuit against the infringer.
What is the legal enforceability of MAP pricing? MAP price policies are different from Terms and Conditions because a MAP policy is a statement by the brand and doesn’t need a signature from the retailer to become active. MAP isn’t enforceable by law. So, a brand can’t just sue a retailer if the policy is violated. All they can do is terminate the account.
Stockman & Poropat, PLLC Can Guide You Through the MAP Policy Process
Are you a brand owner and interested in writing a MAP pricing policy? Contact Stockman & Poropat, PLLC today! We offer a free consultation and will be happy to guide your business in the right direction. Our team looks forward to working with you!
