What to Consider in Creating a MAP Policy
Competition can be fierce in the world of business. One major factor that can influence consumer buying behavior is a product or service’s price. However, pricing does not always mean having an edge over other competitors.
Rather, it also depends on the product or service being offered and how customers perceive it. MAP policy enforcement is also important for business owners and manufacturers. Short for minimum advertised price, this policy protects manufacturers and their products from being advertised below the assigned price by their retailers.
It is 100 percent legal because it protects the interest of businesses and promotes fair trade. MAP policies should be created in a way that will benefit all parties: the manufacturers, retailers, and customers. It helps build trust between manufacturers and retailers by setting the right pricing.
Similarly, it will also help improve their business reputation, which can lead to more customer engagement and purchase.
Why a MAP policy is important
It is important to set a MAP that is in accordance with your product value and business objectives. Setting the price too high, and it can intimidate retailers – unless you position yourself as a luxury brand. Setting a low price, and consumers will perceive your brand as low-quality and cheap.
That said, a MAP policy depends on the brand’s perceived identity. It is essentially important especially if your products are available in various channels (ex. Brick-and-mortar stores, online stores, etc.) It will also depend on the competition if there is at least one brand that offers similar products as you have.
As mentioned, cheap prices do not mean it’s always a good strategy. It can affect your company’s revenue and may even lead to bankruptcy. Experts recommend setting the margin around 25–35 percent so the company can gain profits instead of selling at a loss.
How to create a MAP policy
To set your MAP policy, you can monitor your competition. For one thing, retailers may not purchase from you if you have a higher price than your competitors. But if your products are unique in the market, you can test the price elasticity until the demand is established.
This will help retailers understand the product’s demand regardless of the price. Meanwhile, you should monitor your retailers in case they violate your MAP policy.
For example, retailers would come up with promotions such as buy-one-get-one (BOGO) promos or product discounts so that the products would “move.” BOGO means buying one item at its full price, but giving away the other item for free can violate your MAP policy.
When crafting your MAP policy, make sure to use terms that are easy to understand by all readers. In fact, most MAP policy samples you can find online have only one or two pages and written in simple English. In other words, make your policy as simple as possible.
A MAP policy does not legally bind retailers and resellers. However, this does not mean they can do whatever they want in the pricing as long as it is there is consent from you.
Otherwise, they cannot implement any promotions without your go-signal, and if they do, you can have the right to pull out your products from them. Remember that the MAP policy should only cover the advertised prices and not sales prices.
If drafting a MAP policy sounds confusing to you, it is advisable to hire experienced personnel specializing in antitrust law or pricing policies.