With more and more consumers preferring online sales channels over traditional brick-and-mortar stores, it is ideal that retail pricing policies and strategies manage these online channels to ensure equity across board. It is no secret that many online retailers with minimal overhead attract a large volume of buyers to their stores by introducing aggressive price discounts on valuable items. This practice, without doubt, has led to reduced average retail pricing, mostly affecting the small businesses.
MAP pricing is an increasingly common strategy companies are utilizing to protect their brands. Acronym for Minimum Advertised Price Policy, MAP is a policy established by companies to declare the minimum prices at which authorized retailers are allowed to advertise their products. While it is not an actual agreement, MAP pricing policy has a wide range of benefits including:
- Control and coordination of price margins
- Satisfaction for all authorized sellers
- Decreased ‘showrooming’
- Preventing downward pricing pressure from the biggest retailers
Why is MAP Pricing Really Important?
Any item sold at a price lower than the MAP price can negatively affect the business of other retailers. It can also hurt a manufacturer’s brand, and even their profits in the long run. MAP pricing ensures fairness, allowing any retail outlet – no matter the size – to have a fair shot at selling specific market products. If, for any reason, a retailer sells below the Minimum Advertised Price (MAP), such retailer will enjoy increased sales, but at the detriment of others in the business. With MAP pricing, retailers cannot take shortcuts to gain market popularity, preventing those who have been in the retail business for a long time from taking advantage of new competitors in the market.
As online shoppers generally look out for the lowest priced products in the market, authorized sellers can take advantage of their minimal overhead and relative stability to offer products below the MAP pricing limit. Hence, it is ideal that this policy is monitored by manufacturers. Companies can achieve this by designing strong yet unambiguous MAP policies to prevent sellers from advertising products below the minimum price. These policies must be clearly communicated to the authorized sellers, monitored to ensure compliance, and action must be taken in the event of non-compliance by any seller.
How Can Manufacturers Ensure MAP Pricing Compliance?
To ensure strict monitoring and compliance of MAP policies, companies should do the following:
- Collect evidence via strong proof like screenshots to prove violations from set policies.
- Be open to pricing renegotiations to ensure all retailers are always on the same page.
- Follow up and regularly check on the current selling price.
- Using the set policy, track any violations and show evidence. This can be done by both retailers and manufacturers.
- Take legal actions if any MAP pricing policies were signed, in the event of violations. Manufacturers can even decide to terminate the listing of a retailer for its product.
When retailers follow a set pricing strategy, the manufacturing companies may inform them of new products before they enter the market. In the long run, MAP pricing creates a healthy working relationship between retailers and manufacturers.