There’s no one savvier than the price-hunting consumer. Thanks to numerous marketplaces, search engines and price comparison tools, these discount detectives have every tool at their disposal to find the best bargain — even if one seller ruins it for everyone with an unbeatable price.
That’s why policies like MAP and MSRP exist. But each one comes with subtle nuances. What’s the difference between these important pricing tactics? Let’s take a look.
What Is a MAP Pricing Policy?
MAP (or minimum advertised price) is a policy a brand or manufacturer imposes on its sellers so they don’t advertise a product below a certain threshold.
For instance, if an electronics manufacturer sets a MAP of $19.99 for its headphones, neither brick-and-mortar stores nor online sellers can advertise prices below it. If sellers violate a brand’s MAP policy, they may face a temporary ban from selling the product, the inability to order more stock or a termination of their relationship with the brand.
Note that distributors can still technically sell below the price, they just cannot publicly advertise it. This may include purchases over the phone or behind a members-only website.
MAP policies are most common in the US and Canada. This is because MAP is illegal in other countries like the UK, where it is seen as a type of price fixing.
What Are the Benefits of a MAP Pricing Policy?
The benefits of a MAP policy are many. They exist to keep commerce fair and to protect brands, retailers and consumers from profit loss, fraud and low-quality products.
In addition, MAP policies:
- Keep things competitive. MAP policies prevent one seller from undercutting another (or many). In turn, they keep a brand’s relationships with its sellers healthy while preventing monopolies.
- Protect profit margins. When there’s no MAP policy, sellers are forced to compete with vendors who continue to discount. This results in a “race to the bottom” that erodes margins for everyone.
- Uphold brand integrity. Unsanctioned discounts not only diminish profit, but brand integrity as well. As prices drop, customers may begin to view the item as less valuable. This is especially true for high-end items like jewelry and electronics.
- Reduce customer complaints. No one wants to miss out on a good deal. When pricing is inconsistent, it creates customer confusion, increasing inquiries and complaints about finding cheaper prices and questions about whether or not certain sellers belong in your approved network.
- Level the playing field. Setting price thresholds encourages more sellers and healthy competition. It also gives smaller resellers a chance to compete with major retailers.
What is MSRP?
MSRP stands for “manufacturer’s suggested retail price” and is the list price the manufacturer recommends to sellers. It is a suggestion to keep prices uniform across the market and maintain profit margins. The MSRP also helps consumers assess prices across the board as they shop.
A seller’s list price may fluctuate above or below MSRP from time to time. When demand is high, a seller might increase the price, while excess inventory may prompt discounted prices below MSRP.
MAP vs. MSRP: How Are They Different?
MAP and MSRP have one key difference: obligation. Whereas a brand’s approved sellers must comply with its MAP policy to stay in good standing, MSRP is only a suggested threshold that sellers can choose when to follow.
Here’s a chart to help you keep them straight:
|Minimum Advertised Price (MAP)||Manufacturer’s Suggested Retail Price (MSRP)|
|Standardizes pricing to preserve profit margins and brand integrity||Gives sellers a starting point|
|Important to the retailer||Important to the consumer|
|Breach may result in loss of seller status||No repercussions for fluctuations*|
*Note that while manufacturers won’t reprimand sellers who list outside of MSRP, retailers could still face the repercussions of pricing above the suggested threshold from customers who opt for lower prices.
Should I Choose MAP or MSRP?
When it comes to MAP and MSRP, it’s not really a question of either/or. Both pricing limits are helpful for different purposes.
Institute a MAP pricing policy when you have:
- Too many sellers on one marketplace — Marketplaces aren’t bound by MAP policies, so they’re happy to let multiple sellers list your products. If you don’t have a MAP threshold in place, it becomes difficult to manage all the sellers and track prices in real time. Worse, consumers may fail to identify fraudulent sellers.
- A wide range of prices — Fluctuating product prices may also mean wavering brand integrity in the eyes of the consumer. A MAP policy allows you to control the lower limit of your product prices to ensure they never slip to brand-risking levels.
- Unknown sellers — An oversaturated seller network is a prime environment for a MAP pricing policy. It allows you to “police” retailers and their prices without having to manually check in on each one.
- Disgruntled authorized sellers — Preserving your relationships with approved sellers should be your top priority. If they’re not recouping their investments because of unfair competition and thinning profit margins, you risk losing them as a reseller.
It’s wise to set an MSRP if you sell high-price items like cars, electronics, designer apparel, etc. You can set the suggested retail price to anything you want, but some factors that may influence MSRP include:
- Materials and labor
- Wholesale quantities
- Sale culture (i.e., raising prices to make discounts look deeper to buyers)
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