Pricing strategies are not fixed. They grow and evolve. They change alongside the market, as innovations and techniques create new working relationships between buyer and seller. Pricing strategies of today are not the pricing strategies of tomorrow. But what does the future hold?
This question relates directly to minimum advertised price. MAP is a central pricing strategy in U.S. retail today, but it has its supporters and detractors. Some say the writing is on the wall—MAP pricing’s days are numbered—while others say that MAP policies are here to stay. Who is right?
Let’s look at the pros and cons of MAP and take a guess at what the future of pricing strategies could become.
Pricing Strategies Constantly Evolve
Those who argue that MAP pricing isn’t a viable long-term strategy look at history as an example. It’s true—pricing strategies have undergone plenty of changes since humans first began bartering goods. The MAP policy has only become popular in recent memory, especially as the internet has changed everything about the retail industry.
Therefore, there is bound to be a pricing strategy after MAP. A new trend, development, or idea in retail will necessitate a new solution. However, there are other arguments in favor of non-MAP future other than history.
Many retailers and manufacturers agree to MAP holidays.
MAP Pricing Isn’t Global
First is that MAP policies are already a U.S.-centric pricing strategy. MAP isn’t used in Europe, for example, and there are plenty of other techniques popular in retail. There is MSRP, recommended retail price (RRP), maximum retail price (MRP), and many more.
MAP Pricing Is Already Ignored
Second is that MAP is already being ignored. Many retailers and manufacturers agree to “MAP holidays,” where the retailer can drop prices below MAP to increase sales during important buying seasons. Plenty of sellers violate MAP, too, including Amazon, which has been known to break MAP to price-match other competitors, even at a loss.
Price Isn’t the Only Factor
Third, price isn’t the only factor that converts sales. Many consumers prefer to buy based on convenience or product quality rather than price. Brand loyalty is another key driver. Just look at Apple’s ability to sell phones continually priced higher than its competitors. There’s a chance that MAP falls out of favor as manufacturers and resellers deprioritize price.
With this said, though, there are plenty of reasons why MAP is here to stay.
The Value of MAP
To understand why MAP pricing will remain viable is to understand its value. A MAP pricing policy is an agreement between a manufacturer and a seller that sets a minimum price that a product or service can be advertised. It is not legally binding, which means the most common recourse against MAP violations is to remove distribution access from that retailer.
In fact, many U.S. laws and individual states restrict the ability to set a minimum price, such as minimum resale price or vertical price restriction. This makes MAP favorable because it is an established legal option for manufacturers. Overall, MAP policies help protect margins and brand reputation—the latter taking a hit if a product is perceived as cheap or low quality.
Minimum advertised prices are also here to stay because:
Business and Consumers Win with MAP Pricing
MAP has several benefits for both businesses and consumers. This pricing strategy increases competition by creating price parity. If you can’t differentiate based on price alone, you’ll look for other ways to win, such as quality, value, or added services. MAP levels the playing field and lets businesses separate themselves based on merits other than the lowest possible price.
MAP Highlights Unauthorized Sellers
Minimum advertised prices also do a good job of identifying any unauthorized sellers in the market. As previously noted, MAP isn’t legally binding. Many unauthorized sellers have no problem breaking MAP because they don’t have the same margins as legitimate sellers. They acquired the products through a different supplier for, most likely, a heavily reduced cost. Worse, they could be counterfeiters or thieves. No matter, products listed well-below MAP are good starting point to spot unauthorized sellers.
MAP increases competition by creating price parity.
MAP Doesn’t Prevent Flexibility
Finally, MAP remains a viable pricing strategy because it doesn’t get in the way of sellers. It still leaves plenty of room for flexibility. Sellers can offer their own discounts and promotions to attract buyers. It’s an agreement to advertise a minimum price, not to sell at that price. In a hyper-competitive retail environment, it’s nice to have a little bit of flexibility to ensure the best price is on the table.
The Future of Retail Pricing Strategies
So, what’s the bottom line? What does the future of retail pricing strategies hold? The answer is competition, value, and flexibility. Prices must be realistic. They must create a profit. They must drive sales. This isn’t groundbreaking knowledge.
However, it does speak to the staying power of MAP. Minimum advertised prices do all of this. They ensure that low and high prices are competitive across resellers, that these prices protect margins, and that they benefit shoppers.
If the future of retail doesn’t include minimum advertised prices, it’s a safe bet that whatever pricing strategy comes next will hold many of the same values as MAP.
Editor’s Note: This post was originally published in October 2018 and has since been updated and refreshed for readability and accuracy.