MAP pricing allows brands and manufacturers to determine a lower limit for how retailers price their products.
Nov 28, 2023
If you’re building a brand, chances are you’ve spent some time considering your pricing strategy. But how can you ensure that your products aren’t advertised by retailers at such a low price point that it devalues your brand? This is the role of MAP pricing policies—legal documents that give manufacturers the power to control how low their products can be advertised. Learn more about why MAP pricing is important and how you can establish a MAP policy that protects your products against price erosion.
MAP pricing, or Minimum Advertised Price, is the lowest price at which a retailer can advertise a product, as set by the manufacturer. Effective enforcement of MAP pricing involves monitoring retailer compliance, providing clear guidelines, and implementing consequences for violations to ensure consistent pricing and protect brand value. Although MAP pricing determines how low a retailer can advertise a brand’s product, it does not control the final sale price. Sellers may sell products at a lower price than the MAP policy, as long as that price was not advertised in any way.
The specific rules and regulations around MAP policies differ depending on the country or region. For example, minimum advertised pricing policies are legal in the United States under federal antitrust laws, but they aren’t allowed in the United Kingdom, where MAP pricing is considered an infringement on competition laws. In regions where MAP pricing is allowed, there are strict rules around how these policies are created and enforced. For instance, US manufacturers must set MAP policies without any consultation from retailers and they must be applied and enforced equally across all retailers. As MAP involves creating a complicated legal document, companies must work with legal teams to craft specific minimum advertised price policies.
Here are some of the ways MAP pricing can help manufacturers, brands, and wholesalers:
MAP policies can help companies protect the real and perceived value of their brand identity by safeguarding against price erosion. Price erosion happens when retailers discount products at such a low price that other retailers are forced to drive down their prices as well. These price wars can decrease brand value, as consumers come to expect products to be lower priced. MAP prices are particularly important for luxury brands that rely on maintaining high brand equity, the customer perception of a brand’s value.
MAP pricing protects retailers from being forced to lower prices and decrease their profit margin because another retailer lists products lower to gain a competitive advantage. Minimum advertised prices can discourage unethical pricing strategies like predatory pricing, or selling a product at an unprofitably low price to eliminate competition and create a monopoly. By setting the lowest price possible for a product, a MAP policy helps retailers avoid a constant price war that hurts profits for them and the manufacturers.
A MAP pricing policy can help create a reliable customer experience and maintain clear price expectations for your products. A customer who purchases a brand’s product and then sees it advertised at a far lower price will have a more frustrating buying experience than one who sees consistent prices advertised across the board. Companies can use MAP policies to improve their brand integrity by ensuring that customers who pay a fair price for their product don’t see an advertised price for that same product at an extremely discounted rate.
With legal counsel, businesses can create and enforce MAP pricing policies that establish minimum advertising prices designed to protect brands, retailers, and customers alike. Here are some general steps businesses take to implement a MAP policy:
Start by determining the ideal minimum advertised price for a specific product based on factors like brand equity, production and marketing costs, and competitor analysis. Identify your target customers by conducting customer surveys, creating an ideal customer profile, and studying customer data to determine the price they’d be willing to pay for your product.
Hire a lawyer or legal team to draft a unique MAP policy for your company. Some companies have a single MAP policy that applies to all of their products, while others with a wide range of products at different price points may draft several separate MAP policies. Since MAP compliance involves a comprehensive understanding of antitrust laws, avoid using a cookie-cutter map policy, as this can easily lead to mistakes and legal issues.
Make sure that your MAP pricing policy uses clear language that explains what the minimum advertising price is for a particular product or product line, as well as what the consequences are for MAP violations. When creating your MAP policy, avoid consulting any third-party stakeholders—especially retailers—as this is illegal under antitrust laws.
When determining your MAP policy, weigh the pros and cons of creating pricing exceptions based on certain seasons or holidays. For example, you could include an exemption to your MAP price for Black Friday to give retailers the opportunity to create buzz around limited-time discounts. If you decide to include certain exemptions to your MAP pricing, communicate that information to every one of your retailers and enforce the policies equally across the board.
Research MAP monitoring software that can optimize the process of identifying MAP violators. These price monitoring tools can save companies time by automatically combing through product pages and online marketplaces for any advertised prices that fall beneath your MAP price. Choosing a good price tracking software will optimize your MAP monitoring process and notify you whenever a MAP violation occurs.
Consult with your legal team about how you want to design, structure, and implement consequences for MAP violations. Some of the most common MAP violation consequences include withdrawing products from retailers, restricting future sales, and, in some cases, legal action.
Revisit your MAP pricing policies regularly, and adjust your policies based on factors like market conditions or new product lines. When your minimum advertised price changes, remember to clearly communicate any new information about your MAP policies to all of your retailers simultaneously.
MSRP stands for “manufacturer’s suggested retail price” and represents a price recommendation from manufacturers. Also known as “recommended retail price” or “sticker price,” MSRP is the optimal sale price that a manufacturer or brand wants their products sold for based on a variety of factors, including the cost of production, marketing, and distribution. MSRP pricing is designed to give retailers and customers an idea of what a product should ideally cost.
Although MAP and MSRP can impact how a company prices a manufacturer’s products, they have two key differences:
Companies use MSRP and MAP pricing strategies in different ways. Whereas MAP policies are designed to create a floor for how low retailers can list the advertised price for a product, MSRP is the suggested price for sale. MAP policies affect advertising materials since retailers are only allowed to advertise products at specific price points and MSRP provides a starting price for retailers to consider when listing a product.
In countries and regions where MAP policies are legal, manufacturers can enforce their minimum advertised price across all sales channels. On the other hand, MSRP is only a suggested retail price that retailers can disregard if they choose.
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The laws around MAP pricing vary depending on the country and region where you live, work, and sell products. For example, MAP pricing is legal in the United States under US antitrust laws, but it’s a violation of current competition laws in the United Kingdom.
Yes, you can sell products below MAP pricing, but you cannot advertise products below the MAP price, either online or in a brick-and-mortar store.
Avoid any consultation from retailers when determining your policy, enforce MAP policies equally across all sales channels, and establish an automated MAP monitoring system that notifies you if your products are sold below their minimum advertised price. Most importantly, consult experienced legal counsel when creating your unique MAP policy.
