Key Questions to Consider When Building A MAP Policy

For those unfamiliar, MAP stands for minimum advertised price. It’s a legal agreement in the U.S. between manufacturers and retailers to not advertise their products below a certain price.

An architect has to keep two aspects in mind when creating a physical space: aesthetics, and utility. The building has to excite the eyes and draw interest, but it also needs to be practical. The architect also needs to keep the building’s intentions in mind when designing it. For example, most libraries appear modest and stoic, while most museums and art galleries are flashier and exciting on the exterior.

For brands and manufacturers, building a MAP policy is similar to this. Understanding your brand identity is one of the biggest factors in finding the perfect policy to set up with retailers.

Many brands and manufacturers have a hard time finding the “right price” to set as their MAP for retailers. Setting it too high can scare retailers away, especially since the online retail industry is hyper-competitive. Setting it too low can hurt brand value, giving new brands less of a chance at positioning themselves as “luxurious.” Luckily, Wiser’s new infographic can help manufacturers create the best MAP policy for their brand.

Look to the Competition

Unless you’re an incredibly well-established brand, most retailers will avoid purchasing from you if your MAP is significantly higher than your competitors. Competitor pricing data should inform your pricing as a manufacturer, especially if you’re selling commodity goods. It’s difficult to differentiate yourself as a commodity manufacturer, and this makes it hard to justify a premium price.

However, in many instances, you may not have a lot of competitors selling a similar product. When you’re the only seller, you need to take the production cost into account to determine your MAP policy. Consider your desired margin. The average manufacturer’s profit margin is between 25% and 35%, so don’t sacrifice profits just to gain visibility through a certain retailer.

If you’re the only seller in the market, test your price elasticity until demand is solidified. This will help you understand the wiggle room for your products’ prices. Determine elasticity by dividing the percent change in price by the percent change in quantity. This calculation can give you leverage over the retailer, and help them understand that your product is in demand, regardless of its price.

Red Flags To Watch Out For

Once you establish a strong MAP policy, there are a couple of retail tactics you need to be on the lookout for to prevent MAP violations in the future. First, watch out for retailers that have certain discount specials to draw customers to their store. The most common is BOGO, or buy one get one free. While the special offers one product at its full price, it’s safe to say giving away your product for free is violating your MAP policy.

Another tactic to look for is “add to cart pricing.” A lot of the time, online retailers will keep the price of a product hidden until it’s added to a customer’s cart. This is because they are using a loophole in most MAP agreements. Since they’re technically not advertising any prices, they are not violating your MAP policy. However, they are definitely selling your products below MAP.
Building a MAP policy can take a lot of work, but it will pay off in the long run. It can strengthen your brand value and help you find your target market. If you are looking for more tips to build and solidify your MAP policy, check out our infographic below.

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Brian Smyth

Brian Smyth is a former content writer at Wiser, a dynamic pricing and merchandising engine for online retailers. He holds a BS in business with a concentration in marketing from San Francisco State University.

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