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 the U.S. today, but it has its supporters and detractors. Some say the writing is on the wall—MAP’s days are numbered—while others say that MAP is 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 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. MAP has only become popular in recent memory, especially as the internet has changed everything about the retail industry.
Therefore, there is bound to be something after MAP. A new trend, development, or idea in eCommerce will necessitate a new pricing strategy. However, there are other arguments in favor of non-MAP future other than history.
Many retailers and manufacturers agree to MAP holidays.
MAP Isn’t Global
First is that MAP is already a U.S.-centric pricing strategy. MAP isn’t used in Europe, for example, and there are plenty of other strategies popular in retail. There is MSRP, recommended retail price (RRP), maximum retail price (MRP), and many more.
MAP 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. There are also plenty of MAP violators out there, including Amazon, which has been known to break MAP to price-match other retailers, 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 brands and retailers 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 will remain viable is to understand its value. MAP policies are agreements between manufacturer and 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 violators is to lose distribution access from that manufacturer.
In fact, many U.S. laws and 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 a known 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.
MAP is also here to stay because:
Business and Consumers Win with MAP
MAP has several benefits for both businesses and consumers. MAP 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 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 an easier way 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. MAP still leaves plenty of room for flexibility. Sellers can offer their own discounts and promotions to attract buyers. MAP is 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 Pricing Strategies
So, what’s the bottom line? What does the future of 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 prices are competitive across resellers, that they protect margins, and that they benefit shoppers.
If the future of retail doesn’t include MAP, it’s a safe bet that what comes next will hold many of the same values as minimum advertised prices.