Manufacturers create minimum advertised price (MAP) policies to protect their retail value, profit margins, and brand image. MAP is the lowest price of the product a retailer can promote. Retailers can sell the product for a price lower than its MAP, but they cannot advertise it at a price lower than MAP.
Is it hard to monitor MAP policies?
Tracking MAP violations may be easy at first; however, as your business grows, monitoring how each retailer advertises your product can be quite challenging. Eventually, you would have to seek assistance from a third party for MAP policy monitoring systems.
They will be responsible for ensuring your retailer’s compliance with the MAP policies in an economical and effective way.
Is MAP legal?
Yes, MAP policies are legal under the U.S. antitrust statutes. Keep in mind that the minimum advertised pricing only pertains to the “publicized” pricing of retailers. A retailer has limits when it comes to promoting MAP-protected products; however, a retailer can sell them for any price.
Why should retailers care about MAP policies?
One of the main reasons why manufacturers establish MAP policies is to prevent price wars. While price wars may lead to more sales, it doesn’t guarantee a higher profit. Drastically lowering your prices to compete with other retailers will eventually harm your business.
Constant price cuts of retailers affect the manufacturer’s brand value; this is the reason why a price war is a lose-lose situation. If the product’s price is extremely low, retailers will not bother reselling it. Furthermore, customers will be discouraged by any price increase.
Sparking a price war will affect your profit margin and will damage your customer’s loyalty. It is important to remember that a product with value is easy to sustain, resulting in a positive profit margin. Ultimately, a manufacturer’s brand association is reflected in the retailer’s business.
It is only reasonable for a retailer to protect and follow the MAP policies.
How can retailers benefit from MAP policies?
With MAP policy monitoring, retailers can track their competitors’ prices. With this knowledge, they can gain competitive intelligence and adjust their pricing tactic accordingly. Furthermore, a retailer can alert their manufacturer to take action regarding any violations incurred by their competitors.
All in all, the manufacturer and the retailer forge a better and healthy business relationship.
Compliance with the MAP policies would help you avoid a situation where the manufacturer exercises their legal rights to pull out their products from your store and restrict you from ever selling them again.
As you can see, it is important to follow MAP policies because it helps build a healthy relationship between you and your manufacturer.