Brands that supply their products to retailers and other resellers can benefit from implementing a MAP policy that promotes price consistency. As the number of online channels increases, more and more brands are introducing them in order to protect their reputations.
Here’s everything you need to know about creating an effective MAP policy for your brand.
What is a MAP policy?
MAP stands for Minimum Advertised Price. Brands create MAP policies to outline the minimum price that retailers can advertise their products.
Brands often set minimum advertised prices at a level that will allow retailers to make a decent profit. However, brands should note that this policy only controls advertised prices. This means retailers can sell products below the price set out in a MAP policy in store. But they cannot display a lower price in advertisements or online listings.
A MAP policy is used to ensure an even playing field amongst retailers that want to drive margin or volume, whilst ensuring that the brand’s product is not devalued by a constant price-war.
What happens if a retailer sells below the MAP price?
If a retailer does advertise a product below the Minimum Advertised Price, brands have the legal right to withdraw their products from this retailer and restrict future sales. They can also simply refuse to replenish their supply when they have sold through. It is best practice to adhere to the MAP price for building a trustworthy relationship.
In the US, MAP policies are legal under federal antitrust law because they restrict advertised pricing, rather than the final sales price. However, in the EU and the UK, minimum advertised pricing is viewed as an infringement of current competition laws. In fact, some brands have received fines from authorities in the UK and Australia for trying to implement MAP policies there.
Why is a MAP policy important for brands?
Under a MAP agreement, retailers are informed of the lowest trading price they can display for the product, and as a result, they will often set a minimum trading price for that product across their promotional calendar. This also helps customers in being aware of the true value of products and makes it more transparent for customers to identify fraudulent products.
It’s important to adjust your MAP policy alongside your product life cycle. If you launch a new generation but do not adjust the MAP price for the previous-generation product, then your retailer will struggle to sell-through his old-stock.
There are plenty of compelling reasons for brands to implement a MAP policy across their sales channels. Here are four of the most important.
1. Better brand protection
Without a MAP policy in place, retailers may advertise products at low prices to attract in-store footfall, increase web traffic or clear out stock.
On marketplaces like Amazon, competition for a place on the digital shelf can be particularly intense. Some sellers may be tempted to sell a brand’s products at a cut-throat price – or even at a loss – in order to earn positive reviews, win the ‘Buy Box’ position and boost their sales volume.
If this happens too often, it can diminish the value of a brand or product in the eyes of consumers. This could have a devastating impact on luxury brands and high-end product lines.
For this reason, it is hugely important for brands to retain some control over their minimum advertised price.
2. Better protection for retailers
Although some retailers may want to slash prices, introducing a MAP policy will help protect the profits of other resellers.
When one retailer cuts a product’s price, others may be forced to follow so they can remain competitive. But this race to the bottom will eventually erode retail margins. It may even reach the point where it no longer makes sense for a retailer to stock a brand’s products.
But having a MAP policy in place gives some control to brands and can help them prevent this occurring. In the long-term, this should support their relationships with retailers and resellers.
This is one of the main reasons why brands create a MAP policy.
When a trustworthy relationship between retailer and brand is formed, it can also help in retailers getting access to new products earlier than expected along with other perks. However, to do this, it requires both sides to play-ball, and update the MAP regularly in-line with the products current popularity and relevance.
3. More sales channels
By protecting the margins of third-party retailers, brands may see an increase in the number of channels and sellers that stock their products.
A MAP policy can help create a level playing field for retailers. So even small companies and traditional retailers with large overheads can stock a brand’s products knowing that they will be able to advertise them for a competitive price.
The retailers that are good and are trustworthy partners will appreciate and like that you have a policy. This is because they know that they can remain competitive on price with larger retailers. Once you have a MAP policy, it’s no longer a mere “suggested” price but rather an enforceable price.
If a product is available on more sales channels, it will probably generate more sales. So this can be part of a robust omnichannel strategy.
Note, it’s important to adjust your MAP policy alongside your product life cycle. If you launch a new generation but do not adjust the MAP price for the previous-generation product, then your retailer will struggle to sell-through his old-stock.
4. Accurate performance analysis
When all retailers operate within a similar price range, instead of undercutting each other, brands can get a better idea of how their products are performing.
Since deep discounts aren’t driving sales, brands can clearly see which products are performing well and why. This can provide insights into consumer behaviour, targeting mistakes, marketing successes and retailer performance.
Brands can then use this information to make better business decisions, build more strategic partnerships and focus on in-demand products.
MAP vs MSRP – What’s the difference?
MSRP stands for Manufacturer’s Suggested Retail Price. It is also known as Recommended Retail Price (RRP), Suggested Retail Price (SRP) and sticker price.
Although both MSRP and MAP policies aim to guide retail pricing, there are distinct differences between them in terms of purpose and legal standing.
They have different functions
Manufacturer’s Suggested Retail Price refers to the price a brand believes one of its products should sell for. It aims to coordinate sale prices across online and offline retailers.
MAP policies, on the other hand, are concerned with setting a minimum advertised price for each product. So it’s not always a case of MAP vs MSRP, because brands can actually opt to use both.
Retailers don’t have to adhere to MSRP
Retailers that ignore MAP policy can face repercussions. But retailers aren’t legally obliged to adhere to the MSRP, so there are no consequences for failing to implement it.
Demand, availability and other market forces are more likely to determine a product’s sale price.
6 ways to create an effective MAP policy
Here are some practical steps that brands can take to implement a Minimum Advertised Price for their products.
1. Draft a unique MAP policy
Rather than using a generic MAP policy template, it is better if brands create their own unique MAP policy based around their specific needs, pain points and data.
This ensures that a brand’s MAP policy will be effective. Otherwise, they could end up creating guidelines that work against their business.
Legal assistance will be required to ensure the document is accurate, legally binding and adheres to antitrust laws.
2. Never consult retailers
Brands need to create their MAP policy independently. If retailers are consulted or have any input into the process, this could be seen as price-fixing – which is a violation of antitrust laws.
To make sure your brand never has to face penalties or court hearings, don’t request the opinions of any third-party stakeholders.
3. Reward compliant retailers
When implementing a MAP policy, many brands also introduce a co-operative fund that can help compliant retailers cover the cost of marketing. This is particularly important if some retailers are obliged to follow a MAP policy, while others are exempt.
This extra financial support can help compliant retailers retain their competitive edge. MAP policies often force retailers to return co-op funding after a breach, so it can also encourage them to stick to the rules.
4. Consider including seasonal exemptions
During big sale events, like Black Friday, some brands temporarily waive the rules around Minimum Advertised Price.
This can boost retail sales and create a buzz among consumers. If brands offer this kind of flexibility only occasionally, they should be able to maintain their reputation and the profitability of retailers too.
5. Communicate clearly
To avoid confusion and maintain a positive relationship with retailers, brands should create a communications strategy to accompany the launch of a new MAP policy.
A MAP policy should be easy to understand but sometimes legal advisors need to introduce legal jargon to the document. If this happens, brands can still communicate their policy clearly with the help of checklists, videos, powerpoints and well-briefed brand reps.
Do whatever you can to let retailers know what they need to do to comply with your MAP policy.
6. Create a comprehensive review process
Monitoring and enforcement is a key part of every MAP policy. Prices need to be systematically monitored across retailer websites, social media, marketplaces and price comparison sites. To find out the best ways you can do this, get in touch with us today.
When a violation occurs, there also needs to be a process in place to address the breach. If enforcement is inconsistent, this will undermine the entire MAP policy and retailers are less likely to adhere to it.
While it may seem counter-productive to prevent a retailer from selling your products, it will benefit your business in the long-term. However, you should give every retailer an opportunity to comply before cutting ties. Many brands operate a three-strike system. DC Sports provides a typical MAP policy example, which outlines its three-strike rule in detail.
7. Use price monitoring software
Price monitoring software can help you to address key pain points associated with transparency and keeping a track of your wider product portfolio. Even if you don’t have a MAP policy, our suite of solutions can easily help you to get started and monitor promotional friction in e-tail. Some of the key benefits of using our platform include:
- Easily identify products in-retail
- Manage key out-of-stock products
- Track price leaders
- Monitor price fluctuations during promotional periods
- Analyze the impact of price on conversions
- Increase conversion rates and gain detailed customer journey data with our where to buy solution
- Compare your pricing strategies to your other retailers
This can help your brand gain additional control and more data visibility to help avoid price cannibalization and control brand protection. Our series of reports also allow you to identify coverage issues in retail. Pair this with our Where to buy services can help you identify dead-ends in your conversion funnel. Speak to one of our experts today to learn more about MAP.
Setting a Minimum Advertised Price might not be right for every product and business. But thanks to the increasingly competitive world of eCommerce, introducing a MAP policy makes sense for many brands. Just be sure to seek legal advice before implementing your own policy. Need some help to get started? Get in touch with us today.