Charting a Course with MAP
And if the product is brand new? Pricing is really an art form. For a new product, it should be based on providing a
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Should MAP be the same as MSRP? Generally speaking, MAP is not MSRP. Most antitrust attorneys recommend that brands avoid making them the same. Many feel that MSRP itself is problematic. In Europe, any discussion of retail pricing is illegal. When brand owners list a minimum suggested retail price, it helps retailers and consumers understand the brand’s vision of a product’s perceived value. It also shows retailers what the profit can be. Some brands completely do away with the concept of MSRP and only use MAP. Others set MSRP very high knowing that most sellers will discount a bit from that. As a “suggested” price, MSRP is not enforceable. What about MAP for products already on the market? In that case, determining a product’s current average online price is essential. We recommend that companies monitor their product prices for at least 60 days before locking in their MAP price. We also advise them to avoid choosing prices arbitrarily and base them on the data. If the average online price is 5 percent below where the brand wants it, they can set their pricing formula to either go down from MSRP or up from wholesale. Either works as long as the price reaches the 5-percent threshold. Brands that suffer from hyper discounts require some finesse. It doesn’t usually work to fight the market, so it’s unrealistic to expect a product that’s averaging a 20-percent discount to
immediately go to 5 percent. Instead, brands should take an incremental approach and set the minimum advertised price a bit higher than the low average. When market prices rise, increase the MAP. A MAP policy can be changed at any time as long as the brand informs its sellers of the new prices each time.
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What is a MAP policy? A minimum advertised pricing policy is, in essence, a unilateral written statement by a brand owner that presents the price at which sellers may “advertise” their products. It does not dictate the price at which a product are sold. Brands implement MAP policies to help establish value and protect margins by maintaining a level playing field for all of their resellers. MAP policies are nonnegotiable and are enforced equally among all customers. To determine the MAP price, companies should start by considering the profit margin, whether it’s a dollar amount or a percentage. It should be a realistic price that gives retailers the ability to make some money. There is no legal recourse for noncompliance. In other words, if a reseller refuses to abide by a MAP policy, the brand’s only option is to stop selling (or stop their reps and distributors from selling) to the merchant. Should the brand wish to pursue other remedies, there are different policy strategies that can be used.
Here are other questions brands should consider before setting a MAP pricing policy.
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n 2022, competing on price is going to be harder than ever for specialty toy retailers. But Minimum Advertised Pricing (MAP) policies, instituted by the companies that make the toys you carry, can help in a big way. By evening-out price variations they level the playing field and help ensure equal selling opportunities among all retailers. To find out how MAP pricing works, we reached out to Ronald Solomon, founder of price monitoring company MAPP Trap. Here, he reviews the questions toy manufacturers should consider when they determine the “correct” MAP pricing for their products.
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