MAP (Retail) Minimum Advertised Price?

 

Xmultiple's Engineering Department


A suppliers pricing policy that does not permit its resellers to advertise prices below some specified amount. It can include the resellers' retail price as well. Xmultiple MAP Policy.

Why Manufacturers Enforce MAP

There are many reasons why manufacturers may impose such pricing policies:

1. Manufacturers want to protect brand image, which discounting can work against for premium brands and new, innovative products.

2. High margin is an incentive for retailers (who are the manufacturer¡¦s extended sales force) to promote these items more than others (although without the ability to offer price breaks, it¡¦s harder to incentivize consumers to buy).

3. Maintaining MAP or MSRP maintains retail value so manufacturers can retain wholesale pricing.

4. To prevent bargain basement retailers from underselling other resellers of the product (who may discontinue selling these brands or complain to the manufacturer).

MAP doesn¡¦t necessarily apply forever, especially for seasonal products or categories like consumer electronics where new models are constantly hitting the market. But under a MAP policy, a product must be sold at a MSRP (Manufacturer¡¦s Suggested Retail Price) until the manufacturer permits a markdown.

How MAP Affects Retailers

Some retailers will benefit from the level-playing field (smaller retailers, those with higher operational costs or lower efficiency and retailers with a reputation for excellent customer service), and enjoy extra margin to boot. Though certain industries will suffer, especially in this economy, as sales velocity doesn¡¦t occur until the price moves South. For example, HomeCenter.com reports certain price-sensitive product lines sell $150,000 per month when discounted vs. $10,000 when sold at MAP.

Another downside is inventory costs. If in this economy, people are hanging on to their older model consumer electronics rather than buying the latest models, that inventory is going to back up. Without the ability to markdown, the retailer must deal with the stale stock. The manufacturer has received its money, but also loses as it won¡¦t be refilling inventory for resellers.

And as with any rule, MAP is bound to be broken. Online retailers are already using ¡§click to see price¡¨ in pop-up windows, ¡§add to cart to see price¡¨ and ¡§email for quote¡¨ tactics. Retailers who take the high road and adhere to MAP pricing often find themselves forced to lower prices to compete, or honoring price-matches once discounters run out of product.

 

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