WHAT MINIMUM ADVERTISED PRICE MEANS
A Minimum Advertised Price, typically referred to as MAP, is a policy that a manufacturer or brand puts in place to establish the lowest price that any retailer or reseller will be allowed to advertise its product — whether online, in print or using any other method of publicly displaying that product’s price.
WHAT MAP PRICING IS NOT
It is important to note that a MAP policy does not establish a minimum price that a reseller can sell a manufacturer’s product. It simply sets the lowest price at which any reseller is allowed to advertise that product.
MAP policies vary from brand to brand. Some MAP policies will state a manufacturer’s requirements regarding how resellers may handle discounts, bundling and other customer incentives that might affect the advertised prices of their MAP-protected products. Generally, though, as long as retailers ensure that their advertised discounts and incentives do not effectively create new advertised prices that are below the MAP pricing, they will be on the right side of the manufacturer’s MAP policy.
This means that retailers and other resellers can adhere to their manufacturers’ MAP programs, not dropping the advertised prices of their products below the minimum advertised price required, but still lure customers with other priced-based incentives.
If a retailer offers free shipping on all products, for example, in most cases this would not violate a MAP policy. The customer might still perceive this offer as effectively lowering their total cost to purchase the item — but it would not in any way diminish their perceived value of the product itself.
Another example is a department store that offers customers who open a credit card with that store a 10% discount on all purchased items that day. In most cases this would not violate a manufacturer’s MAP policy because the store’s advertised price for its product would remain intact, the uniform discount available on every purchase in the store and only under the specific condition of applying for a credit card.
THE LEGAL BASIS OF MAP PROGRAMS
Although there has been some confusion as to whether minimum advertised pricing violates antitrust statutes, MAP programs are in fact perfectly legal.
As the American Bar Association explains, antitrust laws restrict manufacturers from dictating the price at which a retailer may sell one of their products in its stores. But because MAP addresses only the minimum price at which resellers are allowed to advertise a product — which, in modern times, commonly includes displaying a price on the reseller’s website or in its shopping cart — these policies are entirely legal and enforceable.
Another reason that MAP policies do not violate antitrust statutes is that antitrust law is designed to prevent businesses from colluding to fix prices at a certain level. With a MAP policy in place, retailers may still legally sell the manufacturer’s products at whatever price they choose — as long as they do not advertise prices below the MAP-required amounts. These policies do not constitute an agreement of any sort between manufacturer and reseller — which would be necessary to establish an antitrust violation.
One of the key cases establishing MAP’s legality was the 2012 federal decision in Worldhomecenter.com, Inc. v. Franke Consumer Products, Inc. In that case, argued in the US District Court for the Southern District of New York, the court found that Franke, a maker of sinks and faucets, was within its rights to enforce its MAP policy — and that such policies do not violate antitrust laws because they do not constitute minimum resale price agreements.
Indeed, Franke’s MAP policy specifically stated that, although retailers were not allowed to publish prices below the MAP price anywhere on their websites, they could advertise the availability of coupons that would lower prices at checkout and even invite customers to call or email to obtain the store’s lowest price.
The bottom line is that minimum advertising pricing remains a legal and enforceable means for manufacturers to maintain price integrity and protect their retailer relationships.
MAP PROGRAMS PRESERVE BRAND VALUE AND STRENGTHEN RESELLER RELATIONSHIPS
As a manufacturer or brand, you will find a MAP policy tremendously beneficial for preserving brand value and strengthening your key retailer and reseller relationships. Here is a brief overview of just some of the benefits of maintaining — and enforcing — a MAP policy:
- A MAP policy protects your brand image and the perceived value of your products.
Regardless of the price point of the products you offer, a key factor in creating and maintaining the perceived value you wish for those products will be your ability to ensure consistent pricing, at the amounts you want, across your channel.
Your $300 handbag advertised by a single reseller online for $139 can seriously undermine the perceived value of that handbag as a $300 item. The same thing can happen if your $49 bluetooth speaker shows up on just one retailer’s website for $20.
If your resellers are able to advertise drops in your products’ prices to any dollar amount they want, to undercut their competitors, this can diminish the value of your brand — as your products’ pricing quickly becomes a race to the bottom. It’s highly unlikely that your brand wants to compete on price alone.
Establishing a minimum price for your products, below which no reseller is allowed to advertise them, will help you maintain this image of quality across your product line and your entire channel of retailers and resellers.
- A MAP policy protects and strengthens your relationships with all resellers.
Today’s Internet-savvy shoppers are able to quickly and easily find the lowest advertised price of virtually any product sold online. This means that more than ever, retailers are forced to work on smaller profit margins.
Moreover, brick-and-mortar stores find it increasingly difficult to compete on price with their online-only retail competitors. Another benefit of a MAP program, then, will be to preserve the ability of brick and mortar stores to sell their inventory of your products, make their margin — and continue to order from you.
A key reason it’s so important to protect your brick-and-mortar retailers is the invaluable role they play in exposing your brand to consumers who might never find your products online, and educating them about your offerings. If the physical stores drop your line because they are continually undersold by online resellers, this could hurt your overall sales and brand awareness.
Having a product line available for resale but without a MAP policy in place (or one that goes unenforced) means that your more productive resellers and your important brick-and-mortar retailers will be less likely to want to continue doing business with you. They will know that at any time another reseller can significantly undercut their prices — and leave them with inventory they cannot sell.
- A MAP policy is also a great tool to attract new retailers for your product line
If a retailer investigating your products for possible inclusion in their line sees that your prices are inconsistent across your existing resale channel, they will see this as a red flag and question their ability to make their margins selling your line.
This is another reason a MAP policy can be so valuable: It can serve as a powerful lead-generation tool for new resellers.
When your brand maintains and enforces a MAP policy, this will send a strong signal to new potential retailers that you are serious about maintaining the integrity of your brand and protecting the ability of all of your resellers to earn their margins selling your products.
- A MAP policy helps you identify your best resellers — and deepen those relationships.
Another important but rarely discussed benefit of implementing and enforcing a MAP policy is that it will give you better insight into who your most productive retailers are — insight you can then use to further incentivize or otherwise reward those retailers.
If you do not have an effective MAP policy, and you are not actively monitoring the prices that all of your resellers are charging for your products, you will be missing a key piece of data when analyzing the sales figures from your resale channel.
When you enforce a MAP policy across your entire resale channel, you remove that element of confusion and establish a level playing field. You create an environment where each of your resellers must compete, for example, by enhancing their marketing, their shopping experience, or their customer service. With price out of the way as a factor, you will be in a better position to identify your best resale partners — and nurture those relationships.
Remember, you want your resale partners to help grow the overall size of your brand’s pie — not resellers who use bargain pricing, and sacrifice your brand value, to stick out a net and steal customers away from their competitors.
WHAT’S IN A TYPICAL MAP POLICY
With a quick Google search, you’ll find many actual MAP policies for real manufacturers and brands. They are generally very short documents — just a couple of pages. And although the specifics different from manufacturer to manufacturer, here is a general summary of the type of information contained in a MAP policy:
- Background on the manufacturer or brand
- A brief explanation or statement about the overall MAP policy and why it’s in place
- The policy’s general guidelines
- Specific advertising guidelines
- A statement about how the MAP policy is enforced, and the consequences for noncompliance
- A list of the actual products covered under the MAP policy
COMMON PITFALLS IN DRAFTING AND ENFORCING YOUR MAP POLICY
A MAP program is only as useful as the written policy on which it is based and in how its company enforces it. Here are a few common mistakes to avoid in your MAP program.
- Inconsistently enforcing your MAP policy
Tracking all of your resellers’ pricing of your products’ on a regular basis can be a daunting task for most manufacturers and brands. Without the proper MAP enforcement software, it can mean manually reviewing the websites of hundreds or thousands of retailers and resellers every day — or several times a day.
Without the tools to make this process efficient, many manufacturers simply create and publish a MAP policy and then hope their resellers honor it. But failing to enforce your MAP policy’s terms, or enforcing against violators only some of the time, will mean your resale channel quickly learns you do not take your MAP policy seriously. And they will learn to ignore it.
Some brands rely on their stores and accounts to alert them to MAP violations. This can work in some cases, but the brands themselves are still not taking a proactive approach, one that they can control — they are simply being reactive, counting on others to enforce their MAP policy for them. Additionally, this can breed resentment among the brand’s honorable resellers acting in good faith to abide by the MAP policy.
- Overreacting to first-time violations
In some cases, manufacturers can become so invested in their MAP policy that they forget many retailers acting in good faith might not realize or remember the minimum advertised prices are in place. Or that a new employee at that retailer, who didn’t know about the MAP policy to begin with, made a decision to lower the company’s price.
These first offenses often require only a gently worded message with a reminder about the MAP policy. Indeed, you can even start your first-warning message on a positive note — thanking the retailer for being a partner and representing your products to their customers.
Often this is all it takes for your reputable resellers to adjust their prices and get back on the right side of your MAP policy. But coming on too forcefully or hostile can frighten away an otherwise valuable partner —or turn them off from doing business with your firm in the future.
- Trying to keep track of all reseller pricing manually
Even if your intention is to track all reseller pricing of your products, and to consistently enforce your MAP policy across your channel, you will find it difficult if not impossible to catch every MAP violation if your method is manually checking up on all of your resellers at regular intervals.
Remember, when it comes to enforcing your MAP policy, consistency is key. And with a manual process, maintaining this consistency across your entire channel at all times will simply not be feasible.
For this reason — and many others — a far better solution is to invest in the right MAP enforcement software.
TIPS FOR SUCCESSFUL MAP ENFORCEMENT
Here are some best practices for creating and enforcing a MAP program that works.
- Be consistent
Whatever terms you set forth in your MAP policy, you need to enforce them completely and consistently.
Whether you take the specified action against a violator or not will in either case send a signal both to that violator and to others across your resale channel that you are not serious about enforcing your MAP policy. And if you fail to take the actions your MAP policy promises, you can expect more violations.
- Create a well-thought-out tiered or graduated enforcement system
Most authorized resellers and reputable retail companies will take quick action to a simple violation-notification message. They will not want to create friction in their manufacturer relationships and won’t want to risk legal action.
So that first notice to MAP violators will often be all it takes to correct the problem. If it doesn’t, however, you will then want additional letters — escalating in tone and in the details of your warning.
The details of these escalated warnings, and the consequences you include in them, will be up to your company. But thinking through the scenario before you face an actual MAP violation will allow you and your colleagues to develop a much more effective policy — not clouded by the confusion, worry or anger that can take hold when you’re faced with a reseller severely undercutting your entire channel for the whole web to see.
- Automate your MAP enforcement
Perhaps the most important component of any successful MAP enforcement program is automation. As we’ve stated, it will be extremely difficult to manually monitor all of your resellers’ pricing of your products at all times — which means it will be nearly impossible to catch every violation, whether in a timely matter or at all.
For this reason, the smart solution will be to engage an automated MAP enforcement program — ideally one capable of crawling the web continuously, monitoring (and taking screenshots of) your resellers’ online presence, and, when it catches a violation, automatically begins your pre-set sequence of warnings and other actions.
A MAP POLICY CAN BE INVALUABLE FOR PROTECTING YOUR BRAND AND YOUR SALES CHANNEL
When you set up your minimum advertised price program, you will have plenty of choice. You can create the language of your policy from scratch, start with one of the many MAP policies that manufacturers keep published on the web, or enlist the help of legal counsel.
And once your MAP policy is written, you will be faced with more choices in how you enforce compliance with it.
Whatever approaches you choose, we believe strongly that to preserve your brand’s image, protect your relationships with all resellers and continue to grow and profit from your resale channel, both a MAP policy and an intelligent enforcement strategy are essential.
Please feel free to Contact Us to discuss how TrackStreet can help you create and implement a MAP Enforcement strategy that builds your business.