The internet, through online shopping, has sparked unprecedented change in the retail sector. Following the emergence of hugely influential e-commerce sites, retailers have been forced to rethink their marketing model to meet the ever-changing needs of today’s customer. Failure to do so has led to the untimely exits of many brands – even household names.
With manufacturers under increasing pressure to attract customers, attention has now turned to retailers to expand their presence, in order to reach a wider audience. While this has loads of benefits, it also brings a unique set of challenges. As product pricing remains the main decision driver for consumers, there could be a chain reaction of a business’s bottom line if one retailer reduces prices to attract shoppers. This could also affect brick-and-mortar stores, as they typically have higher operating costs; in fact, they could be exposed to the risk of going out of business.
This is why Minimum Advertised Price (MAP) was introduced. This policy refers to the absolute lowest cost a retailer can advertise a product at. However, it does not determine the sales price of products. Following negotiations between manufacturers and retailers, a product can still be sold at a price above the minimum advertised price. What’s more, MAP policies are not legally binding. But they give manufacturers the freedom to act against violators of the policy, and strengthen their relationships with retailers in the long run.
Benefits of MAP Policies
Preserves Brand Identity
Pricing, as noted earlier, is one of the most important indicators that drive consumer decisions. Constant price changes can negatively impact a brand’s reputation, and cause it to lose its integrity over time.
Prevents Price Wars
Due to their relatively low operating costs, online retailers have a clear advantage over competitors in brick-and-mortar stores. As a result, physical stores employ in-store price matching schemes to maintain their competitive edge. In the same vein, online retailers use auto-pricing tools to detect when a competitor drops their prices, so they may adjust theirs too. However, over time, this constant price change impacts all stores – both online and physical. MAP policy helps to make for a level playing field for all parties, giving them a fair shot at making profits from their sales.
Builds Great Manufacturer-retailer Relationships
When manufacturers monitor and enforce MAP, they effectively create an enabling environment for continued and fruitful partnerships. In the long term, MAP policies bring so many benefits for all parties involved.
MAP policies do not have to be a retailer’s nightmare. Instead, they can provide real value for all parties involved in the partnership – including manufacturers and even the end consumer. As the retail sector gets more competitive, the misconceptions about MAP policies continue to fade. MAP policies ensure consistency – and this is what every retailer needs to thrive in the marketplace.