MAP Pricing vs MSRP: What’s the Difference in 2024?

MAP (Minimum Advertised Price) and MSRP (Manufacturer’s Suggested Retail Price) are two different pricing strategies that work toward the same goals: to maintain a consistent brand pricing position and to ensure fair competition among retail partners. Understanding the differences between these approaches is imperative if you are involved in pricing processes on the manufacturer’s or retailer’s side.

In this article, we delve into the features of MAP and MSRP: how they differ and how they work.

Contents:

What Is a MAP Policy?

What is MSRP?

How Do MAP and MSRP Work Together?

What Is a MAP Policy?

A MAP policy is a legal document in which a manufacturer or supplier specifies the minimum price at which a product can be advertised by a merchant partner. That is, retailers can sell a product in a physical store at any price, but they cannot attract new customers by advertising the product at a price lower than the MAP.

MAP policy works a bit differently in e-commerce. Retailers that operate solely or primarily online are required to comply with MAP on Google, landing pages, product pages, and product comparison pages.

Otherwise, the manufacturer or supplier can impose penalties on the partner: freeze the seller’s ability to buy or sell inventory, impose a fine, or sue, depending on the severity and frequency of violations.

By setting a MAP, manufacturers can ensure that their products are not sold at prices that are too low, which can undermine the perceived value of the product and damage the brand’s image. This strategy also prevents price wars among retailers and ensures fair competition between sellers.

MAP policy is commonly used in various industries, including consumer electronics, home appliances, and sporting goods, where maintaining brand image and value is critical.

Map prices for retailers

E-commerce is fiercely competitive. Pricing under such conditions is like a chess game, where every action by one seller is inevitably followed by a reaction from another. 

Thus, when one retailer offers a discount, it is quite possible that its direct competitors will respond in kind.

In this way, a price war can turn into a price cascade, in which a brand is left wondering how, in just a few days, the cost of all its products fell to wholesale or, in some cases, even lower.

In the future, when it becomes unprofitable for retailers to sell products with a minimum profit (or with no profit at all), sales volumes will fall. 

When a brand doesn’t monitor its partners’ compliance with the MAP policy, retailers can sell that brand’s products at a loss. This reduces inventory of the brand’s products.

Thus, lack of price control on the part of the brand causes damage both to the brand itself and to its retail partners.

Retail partners playing the long game actually want to work with brands that control MAP because they know that if one of their competitors is dumping and starting a price war, the manufacturer will take care of it.

If you are building the image of a responsible partner, you should not only introduce a MAP policy but also effectively monitor compliance, building fair and equal conditions for all partners.

7 Most Popular Methods of MAP Deviations

The Pricer24 team has been working with e-commerce businesses for over four years. Based on the experience of performing various client tasks, our experts have compiled a rating of the MAP deviation methods online stores resort to most often.

Note that the deviation methods in the table are listed from most critical for the vendor (strongly affecting prices in the entire market) to least critical (not strongly affecting prices).

Method No. 1. Open price

The price lower than the MAP is openly displayed on the online store: it is available to all buyers and is indicated in advertising messages.

Such MAP deviations can be the result of a chain reaction: that is, one retailer automatically lowered the price in response to a drop in the price of another retailer. As a result, the price falls throughout the market.

Method No. 2. Scheduled MAP deviations

This can happen if partners have information about MAP checks. At the time of such checks, the price is kept approximately equal to the MAP, while at other times it is lower than the MAP.

Method No. 3. Deviations at night and on weekends

These often happen because the vendor’s managers do not respond to such price deviations during non-working hours.

Method No. 4. Promo codes

The price based on a promotional code is not displayed on trading platforms and price aggregators but can be advertised to customers in newsletters. For example, all site visitors may see a price within the MAP. However, if the user goes to the site from a promotional newsletter, they may see a lower price for the corresponding product.

Not all manufacturers consider such actions by a partner to be a deviation, but they can lead to a price war if a retailer sees a competitor’s price using a promotional code.

Method No. 5. Hiding goods from price aggregator listings

Some brands monitor only price aggregators due to lack of data collection automation. Knowing this, some online stores do not display items on price aggregators whose price on their website is lower than the MAP.

Method No. 6. Creating duplicate products

A duplicate product card is created without an article number and additional data. The goal is that the customer can understand what kind of product it is, but the parser may not find it or identify it (for example, if monitoring occurs only through links to products from previously defined bundles).

Method No. 7. Protecting against parsing

IT specialists of online stores protect against “robots,” primarily so that competitors cannot parse prices. And since not all vendors use high-quality parsing services that quickly adapt to these protective measures (changing price coding, converting prices to images, blocking IP addresses of “robots,” etc.), they can kill two birds with one stone: hiding prices from both competitors’ and vendors’ parsers.

How to avoid MAP deviations: 3 tips from Pricer24

Here’s what we suggest to avoid MAP deviations:

1. Set a fair markup

The MAP should be designed to give all parties involved the opportunity to profit from the final sale. Therefore, it should reflect not only production costs but also the average markup of retailers. To do this, the manufacturer must have a good understanding of the cost structure of the retail sector and build a pricing strategy so that retailers achieve their profit targets.

2. Really control the MAP

A recent study by Harvard Business Review among manufacturers using a Minimum Advertised Price policy found that unauthorized sellers deviated from MAP 50% of the time. Among authorized resellers, the level of deviations reached 20%.

There are cases when manufacturers have suggested retail prices, but in practice, they are poorly controlled: the manufacturer uses outdated technical solutions, monitors only price aggregators or only market leaders, and checks MAP according to a schedule (which, of course, partners know about). As a result, lots of information is not taken into account.

The Pricer24 platform provides a comprehensive tool for effective MAP monitoring, allowing retailers to track prices across different platforms, quickly identify deviations, and take action to maintain compliance. And all this happens with minimal expenditure of brand managers’ time, as data collection is carried out automatically.

3. Provide transparent conditions for all partners

This is easy to do if the brand manager always has a report with the price history at hand that can be analyzed to determine who bonuses (discounts, rewards, bonuses, credits and other incentives) belong to according to quarterly results.

Our clients use the report on deviations mentioned above for these purposes.

In the diagram, you can see that the partner marked in pink had the most deviations from the MAP for the week, and the partner marked in green had the least.

You can display this report as a table:

The same report can be made for any period of interest to you for all counterparties.

What is MSRP?

The manufacturer’s suggested retail price is the price at which the manufacturer or supplier offers to sell its product to the final consumer through retail channels.

The MSRP is not legally binding. It only provides a guideline for retailers, indicating the price at which the manufacturer believes the product should be sold in order to maintain profitability. The final selling price may differ from MSRP due to discounts or promotions.

Retailers often use MSRP as a starting point when determining their own prices. For example, when determining the selling price, a formula such as setting the price 5% below or above MSRP can be used.

Why should manufacturers control the MSRP?

Controlling MSRP protects product margins

If the manufacturer does not follow MSRP, reseller partners can sell their products at zero profit (or even at a loss): attracting customers with the best offers and getting a margin from cross-selling accessories that have a higher profit margin.

If you want to maintain product margins, monitor partners’ compliance with MSRP.

MSRP protects brand reputation

If the manufacturer does not control MSRP, sellers have more opportunities to compete on price rather than service. Why improve the customer experience when you can simply set a price lower than the competition?

When a customer buys your product from a seller who does not invest in the quality of service, the customer can get a negative experience that will be associated with your brand. This inevitably affects the perception of the product, not just the store where it was purchased.

If a customer is looking for the best deals and sees that all sites have the same price, they will go to a seller they know and trust. And this means less chance of your customers having an unforgettably bad customer service experience.

If you want to provide customers with a better shopping experience, encourage the development of e-commerce service and control compliance with MSRP.

MSRP helps build omnichannel strategy

MSRP benefits not only the manufacturer but also sellers: everyone benefits if they do not lose profits due to dumping. This is especially relevant for offline sellers and those online stores that find it difficult to compete on price with e-commerce market leaders and marketplaces.

Let’s say a marketer in an offline store sees that online stores are regularly selling your product at a price below MSRP, which is a price they definitely can’t afford due to higher overhead costs. If so, they’re likely to be less enthusiastic about using precious shelf space for your products (remember: consumers compare prices offline/online).

Controlling MSRP levels the playing field for all partners: large and small, online and offline. If your product is available through many sales channels, it’s likely to generate more sales. So, it can be part of your multi-channel strategy.

MSRP monitoring may be easy

Controlling MSRP is one of the key tasks for building a strong brand and protecting its competitiveness and margins. However, this process must be done regularly and, frankly, can take a long time for marketers if carried out manually.

We offer an alternative — a useful tool that handles all routine data collection tasks for you.

Using Pricer24, you can:

• conduct market analysis for a specified time period to determine which retailers have the most MSRP deviations, as well as how frequently and to what extent they occur
• quickly identify which partners deviated from MSRP first
• find out at what prices your products are sold at night and on weekends
• see not just whether and when deviations occur but also their size and problem areas that should be dealt with first
• export product lists with MSRP deviations to Excel
• set up automated emails to yourself or to retailers when deviations are detected

How Do MAP and MSRP Work Together?

MAP and MSRP complement each other, providing the basis for retail pricing. Here’s how MAP and MSRP work together to the benefit of the manufacturer:

Setting pricing limits

MSRP serves as a guideline, indicating the ideal price for retailers, while MAP prevents ads for prices below a set threshold.

Maintaining the brand image

MSRP sets a price standard to support a brand’s holistic pricing across multiple retail channels. MAP protects the value of the product by preventing price wars or price cutting and thus preserves the brand’s value and image.

Fair competition

Together, MAP and MSRP promote fair competition among retailers. While MSRP provides a suggested price, MAP ensures that all retailers are on a level playing field, preventing wild price differences. This promotes healthy competition by service, not price.

In essence, MAP and MSRP work in tandem to maintain price stability, protect brand equity, and maintain healthy retail competition.

FAQ

How is MAP policy monitoring different from regular price fixing?

Traditional price fixing is an unspoken contract between sellers created to reduce competition. 

In contrast, MAP pricing is concluded vertically rather than horizontally. In this case, the producer initiates the pricing policy rather than the retailers competing with each other.  

Also, price fixing does not imply the conclusion of any contract between participants.

These are the fundamental differences between MAP and collusion between sellers.

What are the benefits of MAP pricing?

MAP pricing protects brand value, maintains profit margins for retailers, prevents price wars, and promotes healthy competition.

What are the benefits of MSRP?

The manufacturer’s suggested retail price ensures consistent pricing, supports brand awareness, prevents price drops, and serves as a guide for retailers.

What strategies can brands use to successfully implement MAP?

Brands can ensure MAP compliance by using advanced monitoring tools, establishing clear policies, and implementing rapid corrective actions aimed at correcting violations.