Minimum Advertised Pricing Policy: What It Means for Manufacturers

What Minimum Advertised Pricing Policy Means for Manufacturers

All parties agree to a minimum advertised pricing (MAP) policy when a manufacturer enters into a deal with a retailer, especially with an online vendor. It has become a practice in the trade, but why? How do MAP policies impact manufacturers, vendors, and the market in general?

The Competition Equalizer

The rule sets limits in the prices vendors can display on their advertisements, especially in online platforms like paid search. In other words, an active MAP policy prohibits vendors from putting extremely low prices on their products. As a result, the manufacturer prevents price wars among vendors.

From a business perspective, a rule like this protects the manufacturer’s industry and distribution.  With MAP policies in place, companies can focus on delivering quality service and value instead of undercutting prices to make sales. A good MAP policy ensures that retailers are still incentivized to sell the manufacturer’s products, and that the products still have enough profit margins to be widely available in the marketplace, even in Brick & Mortar stores that have high overhead. For manufacturers, a MAP policy acts as an equalizer amid a competitive market.

The Brand Image Protector

Perhaps one of the most crucial reasons for a brand to implement a MAP policy is to protect its brand image. Higher-end brands need to be perceived by consumers as exclusive. Excessive discounts cheapen the brand name, making it impossible for a brand to sell its products at the necessary profit margins.

The Showroom Protector

Most consumers feel the need to try out a product (particularly a pricier product, which is where MAP policies generally come into play) before purchasing it. Therefore, consumers often go to a Brick & Mortar store to see and explore the item before purchasing. In a practice called “Showrooming,” consumers may then purchase the item online from a cheaper retailer. If a Brick & Mortar store has to pay the overhead to display a particular brand and also pay for sales associates to demonstrate and answer questions about the product without making sales on the product, then that store may decide to no longer carry that brand. A manufacturer then loses a valuable distribution partner. A MAP policy helps ensure that the valuable “showrooms” for products can retain their profit margins and incentives to carry a brand.

The Exclusion of the Actual Price

Do note, however, that a MAP policy covers only the advertised price. The actual selling price may differ, depending on the discount or special offer the vendor is willing to give. Why is this the case? US courts have discussed this issue in several cases. (See AmericanBar.org for a great summary) The common conclusion is that the MAP policy extends to the advertised price for a product only, to avoid antitrust issues. With that said, the rule cannot contest the price a vendor actually sells the product for. Therefore, calls to either “Email for Price” or “Call for Price” are generally not considered MAP Violations. Manufacturer polices differ in limits they set for “Add to Cart” pricing, or pricing displayed with a login.

The good news is you can now smoothly monitor your MAP policy. Our cutting-edge solution, PriceManager, can track the compliance of your vendors with the policy. The software even sends automatic alerts to sales reps or directly to retailers informing them of the violation. With this solution, you – as a manufacturer – can level the playing field, establish fair competition among your vendors, and protect your brand’s image and distribution.

Contact us for more details.

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