The retail industry has undergone rapid evolution in the past decade, presenting abundant opportunities for brands and retailers alike. With the advent of technology, the rise of eCommerce adoption has been further accelerated, particularly by the COVID-19 pandemic in recent months. Today’s shoppers have easy access to information and frequently compare prices online before making purchasing decisions.
Given the pivotal role of price in consumer decision-making, gaining a competitive advantage necessitates implementing competitive and dynamic pricing strategies. However, in the race to win over consumers with the lowest prices, retailers often violate brands’ Minimum Advertised Price (MAP) policies. This can be detrimental as retailers sell products at prices lower than those specified by the brands, damaging brand reputation and affecting overall business.
To maintain control over price disparities, protect brands from harmful pricing practices, and ensure fair competition among all retail players, the MAP pricing policy was established.
Understanding Minimum Advertised Price (MAP)
MAP, or Minimum Advertised Price, represents the predetermined minimum price at which resellers agree not to advertise or sell a product below. For instance, if an electronics brand sets the Minimum Advertised Price for a specific cell phone model at $100, retailers and resellers, both online and in-store, are obligated to sell the product at $100 or above.
Why Brands Need MAP Pricing
With the growing eCommerce market, brands find their products being sold by numerous retailers and resellers across the globe, including some they may not even be aware of. This necessitates brands’ visibility into the prices offered by all resellers to ensure adherence to their MAP pricing. Selling products below the Minimum Advertised Price can have adverse effects on brands, including reputational damage and reduced profits.
Seven Reasons to Monitor MAP Pricing
Global Channels and Complex Retail Network: Operating in an analog mode is no longer feasible when products are sold across a complex retail network.
The Age of Amazon: Without effective MAP pricing monitoring, brand pricing becomes susceptible to a “race to the bottom.”
Fierce Competition and the Importance of Competitive Prices: Pricing significantly impacts visibility, seller ratings, and purchasing decisions, reinforcing the necessity of competitive pricing.
Limited Control over Individual Sellers: Managing thousands of resellers across multiple channels and marketplaces presents a significant challenge.
Lack of Control over Marketplace Algorithms: It is humanly impossible to manually monitor price changes across a vast reseller base at all times.
Unauthorized Sellers and Resellers: With a multitude of resellers selling products on various online marketplaces, monitoring unauthorized sellers and resellers becomes impractical.
Counterfeiting and Supplier Encroachment: Protecting the brand becomes paramount in the face of threats from the counterfeit industry.
Differentiating MSRP and MAP Pricing
MSRP (Manufacturer’s Suggested Retail Price) and MAP pricing are distinct from each other. MSRP represents the price at which retailers purchase products from sellers and suggests the price at which the product should be sold. However, retailers have the freedom to set any price in the market once the sale is made.
In contrast, MAP pricing sets a base price that retailers must adhere to when selling a product. It establishes a policy that ensures balance. While resellers can determine their profit margins, brick-and-mortar stores typically struggle to compete with their pricing.
Enforcing MAP Pricing Effectively
In the dynamic world of retail, manual enforcement and monitoring of MAP compliance are nearly impossible tasks. Brands with an online presence require a legally comprehensive, AI-driven MAP enforcement process to ensure complete compliance. AI-driven MAP monitoring solutions available today enable brands to monitor hundreds and thousands of their products sold online and prevent sellers from violating MAP terms. These solutions can be quickly deployed, providing brands with peace of mind.
Advantages of Implementing a MAP Monitoring Solution
Surveillance and Identification of Non-Compliant Sellers: A MAP monitoring solution acts as a vigilant presence in the market, flagging sellers who fail to comply with pricing policies.
Elimination of Unauthorized Sellers: By closely monitoring MAP compliance, brands can identify and eliminate unauthorized sellers, who account for nearly 80% of online sellers.
Cost Reductions: MAP monitoring helps reduce operational and seller compliance costs by approximately 50%.
Prevention of Counterfeit Goods: Effective MAP monitoring safeguards against counterfeit goods that can harm market share.
Building a Controlled Sales Network: MAP monitoring allows brands to convert unregistered sellers into authorized sellers, enabling the growth and control of a robust sales network.
Legal Action and Enforcement: When a MAP pricing policy is established, manufacturers have the right to take legal action against non-compliant brands or resellers, including terminating their listings. Retailers such as Amazon and eBay are also obligated to follow the Minimum Advertised Price.
Standing Out with Minimum Advertised Prices
Adhering to MAP pricing doesn’t mean that resellers must sacrifice profits or consumer satisfaction and retention. Apart from offering competitive prices, there are several ways to ensure customer loyalty. Providing free shipping and returns, implementing loyalty programs, and offering tailored offers are effective strategies to enhance customer satisfaction.
While lower costs can attract customers, multiple other factors influence purchasing decisions, including customer service, easy returns policies, personalized content, intelligent assortment, product availability, and free delivery. Retailers can focus on improving customer satisfaction through a combination of these services instead of violating MAP pricing policies just to boost sales, which can harm the overall retail ecosystem.
By adhering to Minimum Advertised Prices, brands can establish healthy relationships with retailers, creating a level playing field in the retail market.