Online marketplaces and site-to-site price comparisons have made e-commerce more competitive than ever.
How can you maintain authenticity among vendors while maintaining the integrity of your brand?
Real estate prices and approved sales standards are important for improving the game, but they can be difficult to implement when they involve so many fine nuances.
What is the MAP Pricing Policy?
MAP stands for “minimum advertising cost”. It is a policy of a brand or manufacturer that forces its sellers not to advertise products under the door.
For example, if a jeans manufacturer sets a MAP of $48.99, no physical store or online store can advertise a price below that mark.
Technically, distributors can sell below cost, they cannot publicly advertise below the fixed value. For example, a seller who sells under MAP over the phone or behind a member-only website is still in compliance.
How is MAP different from Manufacturer’s Suggested Retail Price (MSRP)? MSRP is the manufacturer’s suggested retail price, while MAP is the lowest advertised price. Dealers don’t get to choose the MSRP (it’s the starting price), but the amount helps set prices among dealers.
It is important to note that the MAP policy only applies to the United States and Canada. In most cases, MAP pricing is illegal in other countries such as the UK, where it is considered a form of price fixing.
What are the benefits of the MAP pricing policy?
MAP policies are important because they protect multiple parties, including brands, vendors, and consumers. In fact, they benefit all businesses because they:
- Keep the competition alive. The MAP rules are widely adopted to ensure fairness among distributors. By setting a minimum advertising price, brands prevent seller A from undermining seller B and winning all sales. Not only does this benefit the brand’s relationship with many vendors, but it also makes the market free and healthy competition instead of creating monopolies.
- Protect the profit margin. The proliferation of automated brokers has allowed brokers to be in close competition with other brokers. Without a MAP policy in place, retailers are forced to keep up with retailers who continue to cut prices, resulting in a “race to the bottom” that Break the limit for everyone.
- Maintain integrity. MAP policies are especially useful for luxury brands or manufacturers that offer expensive products. If a distributor sells a product significantly below the recommended price, customers will begin to see the product (and subsequently the brand) as less valuable.
- Limit customer complaints. Flexible pricing also prevents customer questions and complaints about finding cheaper prices elsewhere. MAP pricing creates a balance between brands, retailers and consumers.
- Increase sales channels. When competition is good, it encourages salespeople across different channels, whether offline or online. It also gives small retailers a chance to compete with larger retailers.
What happens if a seller violates MAP rules?
MAPs are manufacturer policies, not contractual agreements with retailers, which means they are not covered by the law. In fact, manufacturers require distributors to sign MAP agreements in violation of US antitrust laws. That’s according to the Colgate decision, which said manufacturers can set price standards as long as retailers are free to follow them or they don’t interfere (when they do involved in the end of the brand partnership).
Each manufacturer can set its own policy regarding MAP violators. Some companies may send a warning to the distributor, while others choose to terminate the relationship immediately. In turn, retailers must consider whether selling under MAP is worth the risk of not doing business with the brand in the future. It is in the interest of retailers who want to maintain strong relationships with manufacturers while adhering to MAP standards.
Why would a distributor even want to sell below MAP or market value?
- To move goods. Retailers looking to get rid of old inventory may be willing to get rid of it just to make room for new stock that will sell faster. That is why it is important for manufacturers to review their MAP values from time to time, especially when they launch a new generation of products that reduce the value of the old version.
- To win a box to buy. Price-conscious shoppers will always choose the best deal. Retailers who price below the MAP prefer to reduce their revenue from their products rather than experience slow or no sales.
- To get a good review. Some retailers offer low prices to satisfy customers and raise their store’s profile which will last long after they are with the manufacturer.
How to set MAP price forecast?
Several MAP pricing policy templates can help you draft your own, but we recommend that you work with your legal and compliance team or e-commerce professional to plan your approach and come up with a plan that works for you. and your network of resellers. When creating your own MAP pricing plan, remember:
- Write one policy, not two contracts. Pricing agreements expose producers to the risk of violating antitrust laws. For this reason, you’ll want to work with professionals who can keep your MAP as a one-way policy, not an agreement that vendors must follow at the federal level.
- Don’t ask salespeople. Write your policy independently of vendors or third-party marketing partners so that the price you set is free from manipulation or price fixing.
- Include things that make sense to your sellers. Consider offering specific situations and times when marketers can “break” the MAP policy to create buzz and increase sales.
- This can include peak periods such as Cybera Communicate effectively. Make sure your vendors understand exactly what they are getting into when they do business with you. Choose plain language instead of legalese if necessary, and provide additional resources such as videos, checklists and examples to get the point across.
You will also need to develop a strategy for dealing with unauthorized suppliers. Will they receive a warning? Should you send a text message? Or stop immediately? Be sure to mention that under the law, sellers are free to sell and advertise any price they want, but you can also cut links.
Use ChannelAdvisor to set the right price
Pricing your product is strong enough without worrying about the minimum number of ads and seller behavior. But it is very important in a world where channels and market competition are increasing.
ChannelAdvisor experts can guide you through this process, acting as an extension of your team to design pricing strategies, implement automated payers, and have the most impact on your profit margin. ChannelAdvisor manages services that draw on years of e-commerce experience to implement the best repeat options to meet your goals and monitor performance as conditions change.