Already the huge expansion of e-commerce and online retail industry has made the consumer goods market more competitive. Most times, the difference in pricing confuses the consumers of what to purchase.
On the other hand, manufacturers usually work with retailers to open the gateways to sell their goods to a huge audience. This often serves as a disadvantage for the manufacturers because retailers begin to sell their products at the lowest amount than fixed by the manufacturers.
These are the major reasons minimum advertised pricing policies came into effect. Sadly, MAP policies and map enforcement have been around since the early 1900s but they have been more useful and relevant now than before.
If you really wish to know exactly what the minimum advertised price is, then you should read the article completely!
What is MAP policy?
Before diving into the topic deeply, understand some of the basic concepts. The most common technique companies are accessing to prevent their brands and products in the highly competitive e-commerce industry are implementing a MAP policy and map enforcement. These policies are actually establishing minimum rates at which sellers are allowed to advertise their products.
Keep in mind that these are policies, not agreements. As online shoppers wish to look for the lowest priced products, many e-commerce sites show products from the lowest to the highest rate. Therefore, MAP policies are extremely important for any e-commerce company success. Two distinct types of policies usually refer to the MAP policy where brand owners and manufacturers can protect the pricing of their products.
The MAP policy is actually a policy or condition, which indicates the cheapest price a retailer or distributor can advertise the product for sale. This policy sets the minimum amount, which the seller allowed advertising the manufacturer’s product. When the distributor or retailers can break map enforcement/policy, suppliers can able to penalize them with the agreed terms and even terminate contracts.
Traditionally, manufacturers provided a manufacturer suggested retail price (MSRP), which is also called recommended retail price (RRP). In this system, retailers can able to set prices. For example, the television with the MSRP of $500 could be sold by the distributor at $300 along with the retailer advertising discount of this item. However, these things are not possible with MAP.
Why you should require a MAP pricing?
Bear in mind that products sold at the lowest price than MAP can hugely affect the retailers’ business. Besides, it also hurts the brand and sometimes influences the profit actually made by the manufacturer. The major reason for MAP enforcement and map monitoring should be in play so that retailers can able to step in and then have fair pricing at selling products in the ground.
When one retailer starts selling the products below MAP, the sales for other retailers will also shoot up whereas others are left at the danger. MAP policy typically prevents retailers from determining the shortcut to obtaining popularity in the online marketplace. This is the exact scenario with online retailers, which have been in this business for a long time.
Every day, the e-commerce industry is facing a new problem and competition, which leads to a huge drop in pricing schemes. This eventually results in developing an imbalance in the market.
How do you accomplish MAP enforcement?
Are you serious about map enforcement? Well, you should construct reliable and robust MAP policies firstly. It should be unambiguous and draft in a way to prevent sellers’ advertising products below the minimum price. Then, the company should communicate the policies clearly to sellers/retailers and then monitor for compliance. When they do break the rule, take necessary actions such as punishment and penalty.
Just like MAP policy enforcement, you must give importance to map monitoring to ensure everything going perfectly. To do monitoring, compile all the data you wish to track, ensure your monitoring system covers everything, ensure the price monitoring process designed to find every violation mentioned in the policy, and document all the violations.
Why should monitor MAP price?
Take a glance at the reasons to do map monitoring every now and then.
- The market has so many similar products, which are being sold daily. The fixed MAP on the product renders a clear cut margin of the profits that made by the retailers
- Manufacturers have an idea about the product price and the way to sell it in the present market
- It is extremely easy to assess the competition by comparing MAP
- Numerous retailers including land-based and online stores lower the prices in order to clear their inventory. This will surely affect manufacturers and retailers. To avoid this situation, map monitoring is highly necessary
- If the product price is too low, then it can influence the brand name and even lower the product value. Besides, it can provide long-term damage as well. However, set the MAP to ensure the cost is absolutely worth product value.
- The best way of promoting the product online is by setting the high margins for the retailers. Usually, retailers present and sell the goods for manufacturers. Therefore, MAP sets the standards of the goods/products
- Most importantly, the minimum advertised price (MAP) monitoring requires to be in play and then sell the products in the ground
- Those who follow MAP will be at the disadvantage due to those who do not. This might prevent them from buying from the manufacturers again.
- When there is no monitoring of pricing in the ground, people who tend to follow MAP will affect a lot
What are the benefits of MAP policy?
MAP policies benefit all the parties involved in the online e-commerce industry. It includes manufacturers, brand owners, retailers, and distributors. Here are the benefits of implementing this policy in a full-fledged manner.
- No more price wars
- Avail price coordination among sellers
- Avoid the loss leader products
- Remove poor performers
- Have better control of margins
- Keeping distributors happy
- Keep yourself competitive
- Be more appealing to brick and mortar stores
Author Bio: Sanjeev Sularia CEO and Co-Founder of Intelligence Node, a big data retail analytics suite that gives AI-powered tools to keep sight of competition and adapt prices on auto-pilot.