“MAP” and “MSRP” are two of hundreds of acronyms floating around in the world of ecommerce, and they’re two of the easiest to confuse and misunderstand. While MAP and MSRP do play similar roles, they also have key differences that can work in tandem to support and protect your brand.
So what are MAP and MSRP and why do they matter? We’ve broken down everything you should know.
MAP pricing (or minimum advertised price) is the minimum amount that a manufacturer or wholesaler recommends resellers advertise their products for. Retailers can sell a product below MAP, they just can’t advertise it without risking penalties.
“Advertising” and “recommends” are the key terms here. MAP policies should only recommend the price that is advertised online or in-store for a product, not attempt to fix the actual selling price of the product—that’s illegal—or recommend the actual selling price. That’s MSRP’s job.
MAP pricing policy is essentially a one-way boundary you set to protect your brand, protect the margins of your resellers, and maintain fair competition across all of your distribution channels.
Let’s say you’re selling a hammock and set your MAP price at $70. What that means is that all of your resellers, including your brick-and-mortar sellers, need to advertise your product at $70 or more, no less, otherwise they risk warnings and penalties from you. A seller hungry to move inventory might go rogue, mark your product down to $50, and pour money into ads to push sales. That move not only makes the market less fair for your other sellers, but it’s in direct violation of your MAP policy.
MAP not only keeps competition fair. It protects your brand identity. When resellers lower your prices and there isn’t anything to check them, it devalues both your product and, by extension, your brand. Consumers may think your products are of lesser value or that your brand can’t be trusted. Consistent pricing enforced via MAP guards against that.
It’s critical that MAP policies are structured in such a way that a brand avoids violating anti-trust laws. You can and should enforce MAP, but MAP policies cannot be enforced or designed as a two-way agreement.
MSRP stands for manufacturer’s suggested retail price. The key difference between MSRP and MAP is that MSRP is the actual price manufacturers set and recommend retailers charge for their goods while MAP is the advertised price. While MAP acts as the lower limit for a product’s pricing, MSRP acts as the upper limit.
MSRP pricing is how manufacturers standardized pricing across their resale channel and determine what price is fair for their product. MSRP doesn’t necessarily have to be the final price of a product—it’s most often a starting price—but it is determined by taking into account all of the costs associated with the distribution and manufacturing process for a product and the margin amount resellers need in order to make a profit. MSRP also establishes value. For example, if a brand wants to build a premium brand, the MSRP can reflect the actual or perceived value of their product.
Like MAP pricing, MSRP has to be set up as a one-way policy and not an agreement between a manufacturer and a reseller to avoid landing a manufacturer on the wrong side of the law. It’s a recommendation, not a contractual bind.
MAP and MSRP have different applications that may prove useful in different scenarios. For example, MAP policies are typically more useful in marketplaces where competition is fierce and price erosion happens easily if sellers are left unchecked. Ideally, however, MAP and MSRP are a dynamic duo that work together to serve the interests of your brand, support your resale channels, and protect your resellers.
Setting an MSRP establishes value for your product and lets your resellers know you’re serious about controlling channel conflict, maintaining pricing equity, and protecting their margins so they’re more confident setting pricing at the MSRP level.
MAP is the second half of the pricing policy one-two punch. Setting a MAP price for your product, in addition to an MSRP, further standardizes pricing across your resale channel and gives legitimate resellers a fair environment to compete in while setting boundaries against unauthorized sellers harming your brand.
MAP pricing combined with MSRP create a stronger level of brand protection, giving your brand more sustainable, profitable growth.
There are lots of factors that go into an effective MAP strategy, and pricing varies per product per brand. The biggest things you’ll want your MAP pricing to do are:
b) Stay small enough that it discourages resellers from heavily discounting your products and keeps competition fair.
c) Accurately reflects on the brand image and value you want to reflect.
MAP policies can be tricky to draft, because there are so many legal lines to tiptoe around and so much nuance that goes into pricing. They can also be tricky to enforce without the right tools.
Pattern can help you identify MAP violators and regain control of your brand online so that your image and your resellers are protected. To learn more, contact us today.
Find relevant content to accelerate your ecommerce business. Stay on top of industry trends and best practices.