If you are building a brand, you have likely spent some time thinking about your pricing strategy. But how can you ensure that your products are not advertised at prices that are too low by retailers, thereby diminishing the value of your brand?
What is Minimum Advertised Price?
Minimum Advertised Price (MAP) refers to a pricing policy designed to set the lowest prices that retailers can advertise for a brand’s products. Minimum Advertised Price is a legal policy used by brands and manufacturers to establish the minimum price that traditional stores and online retailers are allowed to advertise, along with the consequences of advertising below the minimum advertised price.
Although the minimum advertised price determines how low a retailer can advertise a brand’s product, it does not control the final sale price. Sellers can sell the products at a price lower than the minimum advertised price policy, as long as that price is not advertised in any form. Details of minimum advertised price policies in different regions
Why is Minimum Advertised Price Important?
Brand protection, supporting retailers across all sales channels, achieving consistent pricing for customers
Here are some ways that minimum advertised price can help protect manufacturers, brands, and wholesalers:
Brand Protection
Minimum advertised price policies can help companies protect the real and perceived value of their brand identity by preventing the devaluation of products. Devaluation occurs when retailers significantly reduce product prices, forcing other retailers to lower their prices as well. These pricing wars can devalue the brand, as consumers begin to expect lower prices for the products. The minimum advertised price is particularly important for luxury brands that rely on maintaining high brand value, which is the customers’ perception of the brand’s worth.
Supporting Retailers Across All Sales Channels
Minimum advertised price protects retailers from the pressure to reduce prices and decrease profit margins because of a listing of other retailers with lower prices to gain a competitive advantage. Minimum advertised price policies can prevent unethical pricing strategies such as predatory pricing, or selling the product at a low price that makes it unprofitable to eliminate competition and create a monopoly. By setting the lowest possible price for the product, the minimum advertised price policy helps retailers avoid the ongoing price wars that affect profits for them and for manufacturers.
Achieving Consistent Pricing for Customers
Minimum advertised price policy can help create a reliable customer experience and maintain clear price expectations for your products. A customer who purchases a brand’s product only to see it advertised at a lower price will have a more frustrating shopping experience than someone who sees consistent pricing advertised everywhere. Companies can use minimum advertised price policies to enhance their brand reputation by ensuring that customers paying a fair price for their product do not see that same product advertised at an excessively low price.
How to Enforce Your Minimum Advertised Price Policy
Companies, in collaboration with legal consultants, can create and enforce minimum advertised price policies that define advertised price floors designed to protect brands, retailers, and customers alike. Here are some general steps businesses take to implement a minimum advertised price policy:
Determine the Minimum Advertised Price
Start by determining the ideal minimum advertised price for a specific product based on factors such as brand value, production and marketing costs, and competitor analysis. Identify your target customers by conducting customer surveys, creating an ideal customer profile, and studying customer data to determine the price they would be willing to pay for your product.
Drafting
Original Minimum Advertised Price Policy with Legal Counsel
Hire a lawyer or legal team to draft a unique minimum advertised price policy for your company. Some companies have a single minimum advertised price policy that applies across all their products, while some companies with a wide range of products at different price points have separate minimum advertised price policies. Since compliance with minimum advertised price involves a comprehensive understanding of antitrust laws, avoid using a minimum advertised price policy based on template models, as this can easily lead to mistakes and legal issues.
Ensure that your minimum advertised price policy uses clear language that explains what the minimum advertised price is for a specific product or product line, as well as what the consequences are for violating the minimum advertised price. When creating your minimum advertised price policy, avoid consulting any third parties – especially dealers – as this is considered illegal under antitrust laws.
Consider Including Temporary Exemptions
When determining your minimum advertised price policy, weigh the pros and cons of creating price exceptions based on certain seasons or holidays. For example, you may include an exemption for your minimum advertised price on Black Friday to give dealers a chance to create buzz around limited-time discounts. If you decide to include certain exemptions in your minimum advertised price policy, communicate that information to all of your dealers and enforce the policies equally among everyone.
Create a Solution to Monitor Minimum Advertised Price
Research minimum advertised price monitoring software that can enhance the process of identifying violators of the minimum advertised price. These price monitoring tools can save companies time by automatically scanning product pages and online marketplaces to identify any advertised prices that fall below your minimum advertised price. Selecting a quality price tracking program will improve your minimum advertised price monitoring process and alert you when a minimum advertised price violation occurs.
Consult your legal team on how to design, structure, and enforce consequences for violating the minimum advertised price. Some common consequences for violating the minimum advertised price include pulling products from dealers, restricting future sales, and, in some cases, taking legal action.
Adjust Minimum Advertised Price Policy as Needed
Regularly review your minimum advertised price policies and adjust them based on factors such as market conditions or new product lines. When the minimum advertised price changes, remember to communicate any new information regarding your minimum advertised price policies to all of your dealers at once.
What is the Manufacturer’s Suggested Retail Price?
MSRP stands for “manufacturer’s suggested retail price,” representing the price recommendation from manufacturers. Also known as the “recommended retail price” or “sticker price,” the suggested retail price is the optimal price at which the manufacturer or brand aims to sell their products based on a variety of factors, including production, marketing, and distribution costs. Suggested retail pricing is designed to give dealers and customers an idea of what the product’s actual selling price should be.
Minimum Advertised Price vs. Suggested Retail Price
While minimum advertised price and suggested retail price can influence how a manufacturer prices its products, they differ in two key points:
Uses
Companies use suggested retail pricing and minimum advertised price strategies differently. While minimum advertised price policies aim to establish a floor for how dealers can list the advertised price of the product, suggested retail price is the proposed selling price. Minimum advertised price policies affect advertising materials as dealers are allowed to advertise products at specific price points, while suggested retail price provides an opening price for dealers to consider when listing the product.
Implementation
In
The countries and regions where minimum advertised price policies are legally allowed, manufacturers can enforce their minimum advertised price across all sales channels. On the other hand, the suggested retail price is just a suggested selling price that retailers can ignore if they choose.
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