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Minimum Advertised Price also known as MAP are difficult to enforce across highly competitive markets like Amazon, Google Shopping, Target, etc. Just enforcing the MAP does not mean that you only verify your MAP agreement is in place, but you also demonstrate to your resellers and retailers that you are serious about doing business with them. This is especially true on a platform like Amazon, where the stakes are high, and the costs are competitive. MAP is one of the key features of Product Intelligence Software.
This article will give you a better understanding of what MAP is, why you need a MAP policy, the benefits of having a MAP pricing policy, and guidelines for implementing an effective MAP policy.
Minimum Advertised Price (MAP) is the minimum retail price that the manufacturer sets for its product, and resellers or retailers agree not to go below it in advertisements.
For instance, if a manufacturer sets a MAP at $500, all authorized resellers who want to promote the product must advertise the product at $500 or higher. However, retailers may offer the product below the MAP by using discount coupons and offers.
MAP violation can have a devastating impact on a retailer’s brand image.
Minimum Advertised Price Policy is a mutual agreement between the manufacturer and retailer to ensure the displayed price of the product does not fall below the MAP. This means that even though retailers can sell these products below the minimum advertised price through coupons and discounts, they cannot advertise below the MAP established by the manufacturers in the MAP policy.
Yes, under U.S. antitrust statutes, Minimum Advertised Price is legal. It is not considered a form of vertical price fixation between retailers and manufacturers because it allows resellers and retailers to sell below the set price. Therefore, it is legal, and retailers must strictly follow the policy.
Price Intelligence Software and ad intelligence tools can help you scan huge marketplaces like Amazon, Google Shopping, Target, and even your close competitor’s website, providing insight into their pricing and product specifications.
As Minimum Advertised Price is the lowest price assigned to a product by the manufacturer so that retailers or resellers cannot advertise the product below that price. The MAP policy is very important for manufacturers and brands, helping them to maintain brand integrity and a good relationship with their authorized and loyal retailers. Therefore, it is crucial to create an effective MAP policy that starts by finalizing the MAP of products.
To ensure your Minimum Advertised Price policy is followed by your retailers, you need to ensure your policy is competitive enough in the market compared to similar products from other brands. You must also consider the price which establishes your brand authority in the market. The price should be optimum for consumers in the market willing to spend while ensuring your retail partners are getting a good margin from your product.
With these goals in mind, setting up a competitive MAP is the trickiest process of MAP policy formulation. Deciding on a price without reliable market information can negatively impact your brand. The most effective way to have market visibility is to analyze the market and gather information on products closely related to your product specifications.
Steps to Formulate a Detailed MAP policy document
The document should be created with all the criteria and details included in the actual MAP policy. It also needs to include violation enforcement processes and reward systems for loyal retailers. The document should be motivating to you as a manufacturer and your authorized retailer, who cares about the profit margins. These measures will ensure retailer MAP compliance and control possible price wars between retailers. The document should also define a clear process for retailers to claim violations by other retailers and motivate them to join hands with you.
To ensure your MAP policy is followed by your retailers, you need to ensure your MAP is competitive enough in the market compared to similar products from other brands.
Now, let’s learn more about the aforementioned steps.
The MAP policy must clearly define the set minimum advertised prices of your product across every channel. Defining exact prices reduces any possibility of misusing the MAP policy. Your trusted retailers as well as other retailers will have complete trust with a clearly defined policy.
The policy must mention the scope of your Minimum Advertised Price. There are different versions of MAP based on its scope.
Therefore, the policy document should clearly state the scope of your MAP policy.
Manufacturers and brands need to monitor retailers’ prices across all channels to protect their brand image/value. However, the MAP compliance monitoring process can be tedious if done manually. To achieve an optimum tracking system, one can use MAP monitoring software.
Tracking retail pricing across various channels such as Amazon, Walmart, Big-commerce, and more must be thorough so that retailers will be alerted if they violate the pricing policy. Therefore, MAP policy needs to cover the process of MAP monitoring and the condition of violations i.e., “what is a violation” and “what is not”.
The success of any MAP policy can only be achieved if they are enforced. Unenforced MAP policies can degrade and deteriorate your brand value/image. If the MAP monitoring process tracks any kind of violations, the policy must cover the consequences and after-effects. According to a study by Ayelet Israeli on nearly 500 MAP policies, only 41% of them were clear about the consequences of MAP violations. He states that a lack of clarity when it comes to MAP enforcement can make a company seem indecisive and timid which can invite resellers to see what they can get away with.
Therefore, a policy needs to cover:
The policy should also cover the process where loyal retailers can report the violations. The policy should also cover the channel through which such retailers can report any violations from others. Collaboration between such trusted retailers can motivate them to follow the rules in the MAP policy.
Rewarding retailers who have always followed your policy guidelines help you ensure loyalty and trust with them. We recommend you create a kind of reward system for such trusted retailers.
Minimum Advertised Price (MAP) policies can significantly impact the way you do business and should be at the top of your mind for your pricing and marketing activities. Tools such as Price intelligence software and ad intelligence tools can help you scan huge marketplaces like Amazon, Google Shopping, Target, and even your close competitor’s website, providing insight into their pricing and product specifications.
These insights will enable you to formulate good MAP guidelines. These tools also come with capabilities such as MAP compliance monitoring and violation alert services which are important for implementing successful MAP policies.