Brands supplying products to retailers and resellers can greatly benefit from implementing a Minimum Advertised Price (MAP) policy. In an era of increasing online channels, MAP policies are crucial for maintaining price consistency and safeguarding a brand’s reputation. This article explores the key aspects of creating an effective MAP policy and highlights its significance in the competitive market.
What is a MAP Policy?
A MAP policy, short for Minimum Advertised Price, establishes the minimum price at which retailers can advertise a brand’s products. Typically, brands set minimum advertised prices to ensure retailers can make a reasonable profit. It’s important to note that a MAP policy regulates advertised prices, allowing retailers to sell products below the MAP price in-store but not in advertisements or online listings. This policy aims to promote a level playing field among retailers, avoiding constant price wars that devalue a brand’s products.
Consequences of Selling Below the MAP Price:
If a retailer advertises a product below the Minimum Advertised Price, brands possess the legal right to withdraw their products from that retailer and restrict future sales. Alternatively, brands may choose not to replenish the retailer’s supply after selling through. Adhering to the MAP price is considered best practice as it fosters a trustworthy relationship between brands and retailers.
Legality of MAP Policies:
In the United States, MAP policies are legal under federal antitrust law since they regulate advertised pricing rather than final sales prices. However, in the European Union (EU) and the United Kingdom (UK), minimum advertised pricing is viewed as an infringement of competition laws. However, the European Commission recently published a new regulation that justifies a MAP policy to prevent a distributor from selling a supplier’s product below wholesale prices regularly. It’s worth noting that some brands have faced fines for attempting to implement Minimum Advertised Price policies in the UK and Australia.
Importance of a MAP Policy for Brands:
Better Brand Protection:
Implementing a MAP policy safeguards a brand’s value by preventing retailers from advertising products at excessively low prices. This protects luxury brands and high-end product lines from losing their perceived value due to price undercutting on marketplaces like Amazon. By retaining control over minimum advertised prices, brands maintain their brand image and reputation.
Protection for Retailers:
A MAP policy not only benefits brands but also protects the profits of other resellers. When one retailer slashes prices, competitors often follow suit, leading to eroded retail margins. By establishing a MAP policy, brands gain control and prevent this race to the bottom. This fosters long-term relationships with retailers and resellers, ensuring their profitability.
More Sales Channels:
A well-implemented MAP policy levels the playing field for retailers, enabling even small businesses with large overheads to compete on price. This opens up opportunities for brands to expand their sales channels and engage with a wider range of sellers. Increased availability of products across multiple channels boosts sales and forms an integral part of a comprehensive omnichannel strategy.
Accurate Performance Analysis:
By maintaining consistent prices through a MAP policy, brands can accurately assess product performance. When retailers are not undercutting each other, brands gain valuable insights into consumer behavior, marketing success, and retailer performance. This data enables brands to make informed business decisions, build strategic partnerships, and focus on in-demand products.
Reduces Negative Customer Experiences:
Price is a significant factor in consumer purchasing decisions. Without a MAP policy, sellers offering the lowest prices may attract customers, but this can result in poor customer experiences. Implementing an effective MAP policy removes price as a differentiating factor, allowing sellers to focus on providing excellent customer experiences. This cultivates positive associations between customers and the brand.