Minimum advertised price (MAP) monitoring is a concept within the e-commerce world that affects customers, vendors, and manufacturers.
As an e-commerce vendor, you know you have control over what you price your products at. You also know there are times where you might need to lower your prices in order to beat the competition.
But what about what happens on the other side of the spectrum.
You’re concerned with the customer-vendor relationship, but have you put any thought into the manufacturer-vender relationship?
That’s exactly what we’re going to discuss in this post.
Minimum advertised price (MAP) is a way for product manufacturers to set specific minimum prices they want their products sold at, in order to allow them to still make a profit too.
If a supplier sets their minimum price at $100 then you cannot go lower than that. Going lower than that means you’ll violate their Minimum advertised price terms and could put you in serious trouble.
So follow the following five tips to ensure you understand the importance of MAP and are consistently able to stay within the limitations.
What is the Minimum Advertised Price (MAP)?
MAP is either a legal-written agreement, or non-written agreement between you, as a vendor, and your manufacturer. It allows them to set specific guidelines for how low you can price your product, and allows them to maintain their own brand positioning and sustain their business.
Think about it this way.
If your manufacturer supplies their products to you as well as 10 other stores, that’s 10 stores that are purchasing their products and providing them with revenue.
Let’s now suppose you buy their product from them for $5.
You’re told you’re not able to sell the product for less than $10.
Now if you sell the product for $5.50, although you’re undercutting your competitors, this actually affects your manufacturer.
If your competitors cannot compete with you at all, they’ll eventually stop buying the product from the manufacturer, meaning less money for them.
Tip 1: Make sure your eCommerce site doesn’t violate MAP terms
The first, and probably most important tip is easy to do, but many don’t. Make sure your eCommerce site doesn’t violate your manufacturer’s MAP terms.
Usually, MAP terms get violated by unauthorized sellers. These are sellers who haven’t agreed on terms with the manufacturers and sell the products at any price, regardless.
In these cases, because they’re already engaging in unauthorized sales, there’s little to no incentive for them to actually remain above the brand’s chosen price point. However, this then has a negative effect on authorized sellers who need to compete with unauthorized parties undercutting the market.
What manufacturers do, and need to continually get better at is identifying when a violation has occurred.
Tip 2: Follow your manufacturer’s clear compliance guidelines
Whether it’s a written or non-verbal agreement, be sure you fully understand the guidelines et for you.
These guidelines should be clear and encourage transparency. In an ideal world, the guidelines will be set in clear, easy-to-understand English. If there are elements of the compliance guidelines that are unclear, or you don’t understand, it’s better to get in touch with your supplier to confirm what you should and shouldn’t be doing in terms of minimum advertised price.
In the guidelines, make sure there are terms that explain what happens if a vendor violates the guidelines.
This way, although you won’t be violating the terms, you know that your competitors and unauthorized sellers will know what will happen to them if they do.
It’s also a good idea to understand what happens if you do try and violate the terms.
Usually, the following process happens:
- When the manufacturer first notices you selling their products at a lower price than allowed, they’ll likely get in touch with you to provide you with a warning. They may present you with evidence of the price you were selling it at and remind you of the agreement you made.
- If you ignore their warning and continue to sell their products at a lower-than-agreed price, they will likely issue another warning telling you continuation will result in them refusing to supply you with the product furthermore.
- And, even after two warnings, if you continue, the likelihood is that you’ll be refused point-blank to buy the product from that particular manufacturer.
It’s important to note that at any point, your manufacturer might make changes to their MAP policy. This could be because they’ve found it cheaper (or more expensive to make). Alternatively, it could be because they want to account for specific times of the year when discounts are most likely like Black Friday or Christmas. Usually, your manufacturer will make you aware of these adjustments in advance to ensure that:
- You have time to prepare and work out what price you’re going to set your products at
- You can make sure you’re always staying compliant with the pre-set guidelines. If your manufacturers don’t provide you with a timeframe for the new minimum advertised price, be sure to ask for one.
Tip 3: Setting a minimum advertised price (MAP) assures the cost is worth the value of the product
It costs you to sell your products online.
It also costs your manufacturers to produce the products. A manufacturer will create a product based on how much it cost them to produce as well as the quality they perceive it has.
Therefore, if you want your products to retain some sense of value, you need to stay compliant with the guidelines set for you.
When you think about it, manufacturers want you to make a profit. They have no preference who makes the most profit, but what they want is to create a level playing field, where even newcomers to the eCommerce world could come in and start selling, knowing that they’re not going to be priced out of the market by eCommerce stores with more revenue to take the loss.
Look at the example above. All these retailers are selling the same shoe. The prices range from £49.99 to £75.00.
Clearly, the manufacturer of these shoes has set a minimum advertised price as there is a range of different store selling the product.
How do you think it would affect the market if a newcomer came along and decided to sell these same shoes for £19.99?
Tip 4: Know the importance of MAP monitoring
The reason why MAP monitoring has become so important is down to the way we (as consumers) shop.
With the benefit of online shopping, it’s become easier than ever to try and search for the lowest price for your product.
How many times have you gone online to buy something, only to set the price at the lowest possible?
This results in higher priced items not even getting a look-in. Naturally, vendors approach is to lower their prices.
But what happens when every vendor is trying to lower their prices to compete with their lowest competitor?
You have a race-to-the-bottom approach that doesn’t benefit anybody.
Tip 5: MAP monitoring ensures healthy competition between resellers
Your manufacturer understands that you’re going to want to generate as much profit as possible. But at the same time, you’re one of many resellers and so while it would be nice if you were able to dominate the market and sell your products for as low as possible, it simply isn’t fair on your competitor, nor your manufacturers making the products.
This is why MAP terms are in place: to promote healthy relationships between all resellers. In the same way, you might monitor your competitors’ pricing using a competitor price tracking tool, your manufacturers might also employ a similar tool to check that all of their resellers are compliant.
However, if adhering to the minimum advertised price is an issue for you, then one workaround is to create your own product, patent it and work solely with the manufacturer to ensure no one else can sell your product.
Making sure you follow the tips above are crucial for MAP success. We’ve spoken before about how one effective way to increase your profits is to negotiate a better deal with your manufacturer.
If you have previous history as being non-compliant when it comes to their minimum advertised price guidelines, they’ll be less likely to get involved and want to offer you any specific deals.
Minimum advertised prices (MAP) are critical and essential for both manufacturers and resellers success.
Ensuring you both understand and follow the guidelines is easy but also be sure to pull others out if you notice another reseller offering a much lower price.
After all, all’s fair in love and war, right?