What is a Minimum Advertised Price and what should you do with it? In this article, we explain what it is, for whom it is important and how you can use it to make your brand stronger. And no, it’s not just for the big brands like Gucci or Nike, you can use it too!
What is MAP?
Minimum Advertised Price is the minimum price a retailer may use when placing advertisements. This does not mean that the Minimum Advertised Price is the lowest selling price that is allowed. This only concerns the price that can be seen in advertisements. The allowed price is the price that manufacturers use so that the products cannot be offered for too low of a price. This way, manufacturers ensure that the products keep their value.
Let’s take a Gucci shoe for example. Gucci has a Minimum Advertised Price of $ 799 for this particular shoe. Shops are not allowed to advertise this shoe for a price lower than € 799. It does not matter whether the advertisement can be seen in the store or online, the price of the advertisement may never be less than $ 799.
What is the difference between MAP and the sales price?
Let’s take a webshop that buys Bose products from the manufacturer as an example. This manufacturer will receive a recommended retail price from Bose. This selling price is important because it is aligned with Bose’s image and pricing strategy. The manufacturer then places a MAP on these products that applies to the webshop that purchases the product. The webshops may, therefore, determine the selling price themselves, but in order to keep the Bose brand strong, they must adhere to certain communication agreements, of which the Minimum Advertised Price is one.
What is the difference between MAP and MSRP?
In addition to the minimum advertised price, the manufacturer can also provide an MSRP to his product. MSRP stands for the manufacturer’s suggested retail price. With this, he gives a suggestive price of which the manufacturer believes that the product should have this price.
The difference is that the manufacturer tries to directly communicate about the brand with a Minimum Advertised Price and uses a price strategy with an MSRP. The Minimum Advertised Price is about advertising, the MSRP price is about actual selling.
Why should you use the Minimum Advertised Price?
There are several reasons why manufacturers and brands use a minimum advertised price. A few examples:
- It protects manufacturers/brands against retailers who charge prices that are too low;
- It protects against brand erosion;
- It promotes fair competition between selling points in different distribution channels;
- It therefore also protects small retailers from the large chains;
- It protects the margins of retailers so that they do not have to respond to price fighters.
Do you also want to keep an eye on your prices?
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Does the MAP policy violate the antitrust law?
No. A MAP policy does not violate the antitrust law, because the antitrust law concerns the prevention, prosecution, and punishment of trust formation. With a MAP policy there is no trust formation at all. The MAP policy only ensures that resellers are not allowed to advertise a certain product lower than the agreed price. This does not mean that the resellers are obliged to apply the MAP price to the sales price, so there can be no question of trust formation.
What happens if you advertise cheaper?
There are two possible consequences for the resellers:
- The manufacturer can stop delivering the product to the reseller who advertises it below the MAP price, which is disadvantageous for both parties;
- The manufacturer can reclaim the difference between the ad price and the MAP price. Thus, the manufacturer does not suffer any loss, at most brand damage. The reseller will, of course, lose because both the margin decreases and the difference has to be paid as a kind of fine.
Are there advantages to a MAP for companies?
It is clear why a manufacturer chooses to apply a Minimum Advertised Price policy, but why should you already use this as a retailer?
Not only can it be useful for the manufacturer to apply a MAP policy, it also has advantages for retailers. Retailers can focus more on other product properties or distinguish themselves in the service provided, shipping, etc. Retailers are also protected against competition. Competitors must apply the same conditions. Smaller retailers, in particular, are benefiting from this, as they can now compete more easily with larger players that they would not normally have a chance against. Retailers can still fix the final sales price lower than they advertise.
MAP benefits for consumers.
As mentioned above, retailers can sell for less than the MAP and that is a win for consumers (even though it may seem a bit more difficult to discover the deals). Now that retailers cannot distinguish themselves by the price, they are forced to surprise customers in other ways, for example by offering exceptional customer experiences.
Enough reason to stick to a MAP policy or to adopt one yourself. By sticking to it you also come across as a reliable partner, which benefits the business relationship.