What is MAP Pricing?
M.A.P stands for Minimum Advertised Price, and effects what retailers can advertise as the lowest price on a product. This does not mean that a product can not be purchased below this price point, merely that retailers are unable to display a price below this point in any form of print or online media.
Consumers shopping sites such as Amazon may have encountered MAP pricing without realizing what it was. If a product is displayed, and the consumer needs to add it to their cart before they can see the price, this is due to MAP pricing.
Manufacturer’s producing a product will also set a “list” or set price point for that item. Dealers who purchase this item at cost, then turn around and sell the item to consumers, frequently below this list price. The resulting price is what is known as retail pricing. Dealer prices may range from 10% below list pricing, to as much as 5% above their cost. MAP pricing does not effect what the dealer sells the product at, but if a company selling plumbing fixtures typically sells all items in the store at 25% off the list price, and a manufacturer believes this to be too low, the manufacturer can insist that the retailer not advertise the price as being less than 10% off of list.
If the pricing is displayed anywhere in print, or online, it must meet with MAP pricing. If, however, a store has no printed pricing on its items, and a sales person informs a consumer that the price is 25% lower than list, this is fine.
Why Does MAP Pricing Exist?
MAP pricing exists to protect manufacturers, dealers and consumers. While it may seem strange to consumers that it is in their best interests to not see the lowest prices available from each vendor, this is the case.
Products which require expertise on the part of the sales staff, such as plumbing products, often have a high overhead on the part of the dealer. To sell a consumer the right toilet, the sales person should ideally understand toilet measurements, flushing systems, and the type of home it should go into. While a consumer can always simply purchase a toilet online, and have it shipped directly to their home, if they want to find out the best toilet for them and their uses, they should ideally be speaking to an expert.
If the dealer is selling toilets at 25% off list price, and an online retailer who offers no expertise, or advice for consumers sells the same toilet at 40% off list price, an unwitting consumer may decide to simply purchase the product at 40% off. This causes sales to drop for the dealer. The dealer in turn, has two choices; reduce overhead by getting rid of expert sales staff, or drop the product from their inventory.
This hurts consumers in two ways, a consumer who truly cares about buying the best product for their use, may be unable to get the advice they need. Likewise, it may become harder and harder to find certain items, which in turn, will drive prices back up, while hurting the manufacturer.
MAP pricing stops this; a toilet being sold online, must advertise the same price as a retailer in a brick and mortar store. This gives consumers an incentive to purchase not from the lowest bidder, but from the most expert of sellers. Consumers can still comparison shop, simply asking a retailer, online or in person, what the lowest price is.
Some manufacturers have been known to take MAP pricing to the next step, known as resale selling price policy, which limits the amount that a retailer can discount. Unlike MAP pricing, this does not protect consumers or dealers, and instead eliminates competition and eradicates lower prices, thereby forcing consumers to look at other products, and dealers to drop these products from inventory.
MAP pricing, when used properly, can help ensure that products, and knowledgeable sales staff remain in existence for years to come. Savvy consumers should know that in order to get the best deal, sometimes all they have to do is ask.