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What is MAP Pricing?

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What is MAP Pricing?

A fundamental part of e-commerce (or really commerce itself) is the idea of competition.

Competition is healthy and is the key thing that protects consumers — when companies have to compete to sell products, it automatically drives prices down.

So what does competition have to do with MAP? Well, quite a lot, actually...

Curious what MAP stands for in retail, and how it helps or hinders competition? This article will give you a clear overview of what MAPs are, who uses MAP pricing, and why they’re so important to many retailers.

But as a disclaimer, this piece is by no means legal advice. Instead, this is a purely educational tool meant to give you a broad understanding of MAPs. If you’re curious about the legal side of things though, feel free to reach out to Martijn van de Hel at Maverick Law — you can check out his blog post about MAPs here.

 

MAP pricing definition

So, what actually is MAP pricing?

MAP stands for Minimum Advertised Price. MAPs come in the form of policies, created by the manufacturer or brand of a product. These policies stipulate the lowest price point that retailers may use when advertising a product. In other words, as Mattew Hudson writes,

“In its simplest form, minimum advertised pricing (MAP) is the lowest price a retailer can advertise the product for sale. To clarify, this does not refer to the lowest price they can sell it for in their store—just the lowest that they can show online or in an advertisement.”

There are MAPs for almost every product on the market, depending on where you are in the world, and these policies are extensive. Brands and manufacturers invest a lot of time in creating these MAPs, and have highly vested interests in monitoring the market for MAP violations.

 

What is a MAP pricing policy?

A MAP policy is a policy any legitimate brand will have a retailer agree to before a brand sources products to the seller.

The definition of “advertising” varies per supplier. In general though, “advertising” means any advertising off-site. So, if you advertise at the MAP and pull people to your website, then advertise on-site at a lower rate, you may be within the bounds of the agreement. However, some brands and suppliers may see on-site advertisements as a violation of the policy. And to make it even more confusing, the definition of advertising can vary by product.

Some brands may even make special allowances for MAP. In these cases, retailers may be able to advertise a lower policy to special groups, like active-duty military service members or veterans, for example. The retailer would need to prove that only these exempt groups could benefit from the MAP reduction.

Another example of an exemption would be based on seasonality. Some brands may allow retailers to advertise below the MAP on Black Friday or during the holiday season.

All this is to say that every single MAP policy is unique. You should check your MAP policy carefully to see what is and isn’t allowed.

 

IMAP pricing vs. MAP pricing

iMAP stands for Internet Minimum Advertised Price. It is a MAP policy that brands draft specifically for products sold online. These policies generally outline MAP guidelines for webshops that advertise online.

Traditional MAP policies have focused largely on offline advertising such as catalogues, newspaper advertisements, billboards, TV commercials, and more. But since e-commerce is so vastly different from these other forms of media, manufacturers needed to create a separate type of policy to cover the market dynamics.

“There generally is not much of a difference between iMAPs and MAPs,” says Brandon Smith of Whitefield Capital. “But again, this can vary by manufacturer, product, and store location.”

 

MSRP vs. MAP pricing

MSRP stands for Manufacturer Suggested Retail Price. It’s also known as the SRP (Suggested Retail Price) or the RRP (Recommended Retail Price).

Regardless of what you call it, the end-result is the same. MSRPs are different from MAPs because MSRPs provide guidance on the actual sale price for a product, not just the advertising price, and they are not binding. Often retailers will actually sell below MSRP because pricing in the market typically decreases over the product lifecycle and the margins that retailers make on product allows for this.

One of the biggest differences between MAP and MSRP though is the legality of the price. MAP pricing is legal in the US, but most likely not in the EU. Providing a MSRP, on the other hand, is a completely legal practice in both regions.

 

Why do brands enact MAP policies?

MAP policies are most often seen with brands that rely heavily on their brand identity, such as luxury goods. These companies know the value of their brand, and have a vested interest in maintaining a certain level of exclusivity.

Pros of MAP pricing

  1. MAP policies help protect brand (and retailer) perceptions - One of the biggest pros of MAPs is the amount of control it gives brands over their price perception.
  2. MAPs only affect advertising, not sales - MAPs may have a bad reputation for affecting sales, but these policies are not meant to affect the final sale price. Instead, MAPs focus solely on the advertised price; retailers are free to sell the product at whatever price point they like.
  3. MAPs level the playing field - MAP policies standardize price expectations across all marketing channels.
  4. MAPs may protect retailer margins - If MAPs are standard in a market, it provides an effective “floor” for the market. Some argue this could hinder competition, but on the other hand this floor can prevent a race to the bottom.

 

Cons of MAP pricing

  1. MAP limits the amount of control retailers have over product price - MAPs come directly from brands or manufacturers, which some argue may limit the freedom a retailer has in creating a unique marketing and advertising strategy.
  2. MAPs may influence market competition. -“MAPs may decrease price fluctuation,” says Travis Rice, a Digital Marketing expert. “It’s certainly not the only reason that there could be less price fluctuation in a market, but it could be a factor.” The European Commission to agree. MAPs are most likely illegal in the European Union for this reason. A 2015 notice from the commission stated: “Under European antitrust rules, MAPs will likely be restrictive of competition within the meaning of Article 101(1) TFEU. While efficiency defenses under Article 101(3) for such clauses are in principle not excluded, it will be very difficult for companies to demonstrate in a particular case that pro-competitive effects of the clauses outweigh the negative effects. These principles are beneficial for European consumers. They ensure competitive markets with low prices and a wider choice.”
  3. Administrative workload - MAPs are primarily used in the United States, which can add a layer of administrative work if a retailer or brand wants to operate internationally.

 

Is MAP pricing legal?

MAPs are legal in the US, but there may be some variation from state to state. Most legitimate brands will have a policy in place that you will need to sign if you want to be an authorized reseller of the brand’s products.

The same is not true for Europe. “This practice is probably illegal in Europe,” comments Sander Roose, CEO of Omnia. “In Europe, pricing decisions, both in-store/online as in advertisements - remain at the sole discretion of a retailer.”

 

How to enforce map pricing

Enforcing MAPs comes down to two actions: monitoring the market for violations, then acting on those violations.

  1. MAP pricing monitoring - So retailers, how do you make sure that you don’t violate the MAP? One way is to set the MAP as your price floor in whatever dynamic pricing system you use. When you add safety rules into your pricing strategies, just set the MAP as the absolute minimum price. Brands can also use pricing intelligence to monitor their MAPs. (How to enforce MAP pricing). With automated data collection, brands can track prices for all their products across every single authorized retailer. With this knowledge, a brand can then discover if a retailer is operating below the MAP.
  2. MAP enforcement - MAP policies are strict. As one retailer stated in a tour of his warehouse, “[brands are so strict about MAP policies that] we could possibly lose our account forever over one penny.” Most MAP policies clearly outline their methods of enforcement. If a retailer does violate the MAP, brands in the US are allowed to retaliate. MAP pricing enforcement means consequences for retailers are high. Some of the consequences of a MAP violation could be exclusion from future promotional deals terminations of partnerships. Brands can even put retailers in “timeout” and can avoid selling to a retailer for a period of time. The high risk of a MAP violation is enough to keep most retailers in-line. It also creates an environment of self-policing. Retailers are likely to report MAP violations to brands and suppliers because they know that the violating party will be offering the lowest price on the market...and reaping the benefits as a result.
  3. Can you enforce map pricing on Amazon? - Amazon does not enforce map policies on its platform, but that doesn’t mean brands don’t have any power. Many manufacturers may assert Intellectual Property complaints against Amazon when they find a MAP violation. You will have to monitor Amazon yourself for MAP violations. If you do spot a violation, you will have to identify the Seller and send a cease and desist yourself. One way to overcome this obstacle is to join Amazon directly as a brand and use it as a new sales channel.

 

Conclusion

MAP policies can be somewhat controversial. On the one hand they give brands and manufacturers more control of their price perception, but on the other hand they take away some of the freedom that retailers need for free competition.

Regardless of where your opinion falls, MAPs are an important concept to know and understand, especially if you operate in the United States. These policies can significantly impact the way you do business and should be at the top of your mind for your pricing and marketing initiatives.

 

Curious to learn about some other pricing strategies? Check out some of our other articles below.