Brands create minimum advertised price policies (also known as MAP policies) for many reasons. First off, discounted retail prices can diminish a specialty or luxury brand’s perceived value. MAP policies also provide brick-and-mortar retailers a level playing field helping them to earn similar profit margins as online stores. Without that, those retailers lose any profit motive they have in selling the brand.
Sometimes a brand is proactive, and implements a MAP before they have too much price erosion. These companies tend to avoid the pain of heavy discounts. But other brands are reactive and wait until their products are already in trouble, which is clearly problematic.
What is MAP Compliance?
At its core, MAP pricing states that a retailer may “advertise” (not “sell”) a given product below a certain price. So, MAP compliance is when a retailer keeps the advertised (or listing) price at or above the policy price. Any lower, even by a penny, and the listing is deemed a policy violation, which can result in penalties that sometimes result in account termination.
Why is MAP Compliance Important
Brand Perception - When a brand implements a MAP policy, they are making a statement about their brand identity and the value of their products. Similar to MSRP (minimum suggested retail price), a MAP reflects perceived value. Consumers are used to paying higher prices for higher quality products. Therefore, when they see a deeply discounted selling price, the product becomes less valuable in their eyes, which is not what specialty and luxury brands want.
Level Playing Field – Because of their different business models, online sellers tend to have lower expenses than brick-and-mortar stores. Therefore, ecommerce merchants can sell the same products at a lower price and make the same margins. Frequently, low online prices can cause something called “Showrooming.” This is when a shopper finds the product in a physical store, then purchases it for less online.
Consistent and Predictable Profit Margins - MAP policy compliance is essential so that authorized retailers can earn consistent profit margins. Businesses need this in order to predict their cash flow needs throughout the year. This applies to the brand owner’s profit motive as well. Out of control discounting can cause downward pressure on wholesale prices, and larger retailers frequently require mark-down money if they can’t meet their expected margins because online pricing is too low and they have to match their competitors.
Credibility and Good Business – Brands that adopt MAP are viewed more favorably by most retailers. It shows that they believe in the quality of their products so much that they’re willing to forego some top-line online sales to protect it. But it’s important to actually enforce the policy in order to maintain credibility.
Get the policy right – Make sure that the policy reflects the values and objectives of the brand. State the “why” so sellers understand the goal. Be clear in defining what constitutes a MAP violation and try to keep it simple. Some companies overly complicate this. State what sellers are risking by violating. And do not require a signature. MAP is a policy, not an agreement!
Products and Prices - Brands that adopt MAP need to plan for success. Don’t feel the need to MAP all products, only the most important ones. We frequently find that the 80/20 rule applies. And be sure that the actual MAP prices are realistic. A MAP that’s too high may prevent compliance.
Inform all stakeholders – Make sure all members of the team understand the reasons for the policy, as well as the consequences of non-compliance. It is especially important to let sales reps, the warehouse and the bookkeeping departments know so that no orders slip through the cracks by mistake.
Enforce, enforce, enforce – Brands with MAP policies ultimately need to attach and enforce consequences to non-compliant sellers. Some brands will suspend merchants for each individual product they violate. Although this method mitigates some of the revenue losses, it’s extremely difficult on the brand’s operations. The most common strategies are to suspend on the product line level. Either way, a MAP policy without teeth is as bad as having no policy at all.
Tips for Effective Enforcement of Minimum Advertised Price Policies
Customer Vetting - The best way to enforce MAP compliance is to avoid selling to businesses that will violate the policy in the first place. Just as a brand vets potential customers for credit-worthiness, they should also customers for physical addresses, phone numbers (that work), professional emails, etc. This information is essential in the event that they need to contact retailers about violations. It’s also important to check online sellers' ecommerce sites to see if they discount other brands’ products.
Single point of contact - Internally, brands should assign MAP administration to a single individual. That person should be the only person in the company who can discuss it with accounts. The conversations should be limited to explanations of the policy, and confirmation of violations and consequences. There’s no negotiating with MAP!
Policy Rollout Period – Before actually implementing a new MAP policy it’s a good idea to send notices out before the policy takes effect. Sending it to all merchants (whether violating MAP or not) puts everyone on notice. In addition to this being a business-friendly move, it also allows for a brief sell-off period. It’s better to let companies that don’t want to comply liquidate their inventory before the policy starts.
MAP Holidays – From time-to-time retailers need to offer discounts. Amazon Prime Day is a good example of this. After the holidays — or for seasonal products — some retailers need to mark-down certain items that didn’t sell. If the retailers know the brand understands and will accept discounting under certain circumstances, they’re more likely to honor the policies and stay loyal customers.
Price Monitoring and Other Enforcement Tools
The basic needs of MAP enforcement are “Monitoring (searching products), Identifying (getting seller contact information), and Enforcing (informing violating merchants).” Some companies try to do all of these things on their own, which is highly inefficient and largely ineffective. A human being simply cannot manually search all of a business’s products by hand on all websites, so software needs to be adopted. Just be sure whatever software is subscribed to does at least those three most elements:
Price Monitoring – It all starts here! Having software that can navigate ecommerce to find products is essential. Doing this by hand and/or relying on retailers to report one another of MAP violations is highly inefficient and largely ineffective. Services like MAPP Trap have algorithms to find products across the broader internet, and to ensure the results are correct.
Merchant Identification – Amazon sellers are notorious for providing fake information about themselves. But without accurate contact data, a brand doesn’t know which of their customers are non-compliant. MAPP Trap’s trained investigation team uses sophisticated skip-tracing techniques to uncover a seller’s true identity. After all, you can’t stop them if you don’t know who they are.
Policy Enforcement – Once the brand has found the infraction, identified the seller and found contact information, they need to tell the seller about the infraction. Although an individual can do this, the time spent in aggregating the data for the email, creating and sending the email and then tracking who got what, when, what step they’re on, etc., is impractical.
MAP compliance case studies
MAPP Trap has helped hundreds of brands across many industries to not only identify their weaknesses, but to create and administer MAP policies and authorized reseller programs to help safeguard brand equity. Here are a couple of examples.
SynergyLabs is a leading manufacturer of dog and cat hardgoods. Due to an out-of-control problem of hyper discounting and too many online merchants, their loyal accounts were suffering from decreased margins and lost sales.
SynergyLabs partnered with MAPP Trap in late 2021 to begin the fight to regain control of their brand and where it was being sold. MAPP Trap identified the main pain points and made recommendations based on the market conditions to help them achieve the following objectives:
- Decrease MAPP Violations and Violators
- Decrease the # of merchants on Marketplaces
- Remove unknown/unauthorized merchants
Following MAPP Trap’s guidance, within three months from announcing their new MAP and Ecomm policy, the market conditions quickly began to reverse course and SynergyLabs started to gain control of the market.
MAP violations were reversed and unauthorized sellers were removed quickly which has helped to maintain and rebuild relationships with their biggest partners:
- Overall daily MAP violations were reduced by 61%
- Total # of Violators decreased by 55%
- Total # of Products Violated decreased by 33%
- Total # of Amazon marketplace sellers decreased by 43%
This market leading cabinet and lighting company came to MAPP Trap to help them launch their IMAP policy. Rev-A-Shelf had never established an IMAP program and were starting to get pressure from their merchants to reduce their wholesale prices to deal with a “race to the bottom” that sellers were currently engaged in.
MAPP Trap created an extensive market assessment, then developed, implemented and administered strategies (including MAP and authorized reseller policies) to meet the following objectives:
- Decrease MAPP Violations on Amazon.com
- Decrease MAPP Violators on Amazon.com
- Remove unknown and unauthorized sellers on Amazon.com
- Increase online advertised prices
Within twelve months, the results were impressive:
- Overall daily MAP violations were reduced by 87%
- Overall MAP Violating Amazon Sellers reduced by 63%
- Total Amazon sellers were reduced by 35%
- Average advertised prices increased of their top seller products increased between 20% - 47%