The internet is a very powerful marketplace for many businesses in this day and age. It’s hard to find a business that doesn’t use the internet somehow – whether to sell their products or stay in touch with their consumers.
With the ever-growing popularity of the internet and its widespread availability, businesses must take advantage of any opportunity they can get to impact potential consumers and bring them into their e-stores (or brick and mortar stores). One such tool to help enhance your brand exposure is marketing.
E-commerce has become more popular than ever before because it is convenient for customers and because of how inexpensive it can be compared to running a physical store. However, this newfound popularity has come to some new challenges for businesses and how customers behave.
One of the most notable changes has to do with pricing. Customers are now used to getting discounts and good deals when shopping online and are quick to compare shops. As a result, many e-commerce businesses find it more challenging to profit than their physical counterparts.
How can e-commerce businesses combat this issue and still be successful? One way is by using the Minimum Advertised Price Policy (MAP). This article will explore what MAP is, how it works, and how e-commerce businesses can use it to their advantage.
What is the Minimum Advertised Price Policy?
So, what is MAP pricing? Since most brands will not sell directly to consumers, they set a MAP price that prevents manufacturers or distributors from advertising their products at a lower price. This helps protect the brand’s standard pricing against any discounts. These policies are common among large brands with specific target demographics and high-demand products.
The reasoning behind this policy is to prevent discounting of the product, which could damage its marketability or demand if it becomes viewed as cheapened by consumers because of the discounting.
Typically, online retailers are reluctant to adhere to MAP policies since they want their customers to access their favourite products anytime and anywhere; however, there is still some room for deals online.
What Does This Mean for E-commerce Businesses?
Let’s suppose that the MAP price of a t-shirt you are trying to sell is $30 per shirt, but you are selling it at $25.
This would tell customers that the brand does not authorise you to sell their product, and they may take their business elsewhere or complain directly to the brand if they notice your sale after purchasing the t-shirt, believing you were misleading them about where they were buying their merchandise.
To avoid violating MAP policies, most companies will increase the retail price of certain products instead of taking a loss due to discounting. It’s not being greedy; it’s survival.
If you can’t match or beat the price your customer is getting from the authorised reseller, they will buy from the authorised reseller. You’re better off not selling at all than selling at a lower price and damaging your relationship with the brand owner.”
Some e-commerce businesses choose to abide by MAP policies, but there are still ways for them to offer discounts on products. Online retailers can set product prices below MAP if they are not advertised.
So, in our previous example, the retailer could sell the shirt for $22 but cannot list it for sale at $20. They could also offer a discount code to customers who purchase from their website if the code is not advertised.
Why Should E-commerce Businesses Consider Adding MAP Into Their Pricing Strategy?
There are a few reasons companies might want to consider adding a MAP policy into their pricing strategy.
- First, abiding by MAP policies and increasing prices instead of discounting allows businesses to maintain a good relationship with the brand owner.
- Second, it can help reduce price competition from unauthorised resellers and keep product demand at a standard price.
- Finally, it can also help protect businesses against negative online reviews from customers who feel misled about where they bought the product.
While following a MAP policy has some benefits, it’s important to remember that adhering to these policies can limit the number of profits you can make on certain products.
For example, say that you are trying to sell a t-shirt at $30 per shirt but adhere to MAP policies and choose not to discount. Instead of making $20 for each one that sells, you’ll only make $10 after paying the brand owner its 20% commission with this pricing strategy.
How to Operate an ECommerce Business with MAP in Mind
If you are an e-commerce business owner, there are a few things that you need to keep in mind when implementing a Minimum Advertised Price Policy:
- Make sure that the policy is clear and easy to understand.
- Make sure that all of your employees are aware and know how to use MAP violation monitoring software.
- Periodically check on competitors’ prices to ensure that they are not advertising their products below your minimum price.
- Keep track of any changes in your product’s pricing and adjust your minimum price as necessary.
- Monitor your sales and profit margins to ensure that the policy does not negatively impact your business.
- Be prepared to make some exceptions to the policy in special promotions or sales cases.
Why You Should Consider Adding MAP into Your Pricing Strategy
There are several reasons why you should consider adding a Minimum Advertised Price Policy into your pricing strategy.
- It can help protect your business from being undercut by competitors.
- It can help maintain your pricing power and prevent your products from being devalued by steep discounts.
- It can help you achieve a higher profit margin on your products.
- It can help increase brand exposure and loyalty among customers.
- It can be an effective tool for combating price-sensitive shoppers.
Bottom line: How Do I Address MAP Policy With My E-commerce Business?
When deciding whether or not you should follow MAP policies for your e-commerce business, it is essential to consider how different decisions will affect your sales revenue and profits.
Here are some things businesses might want to consider before choosing which way they want their prices to go:
Don’t follow MAP policies if you want to keep your product prices higher, and do not mind if customers buy from authorised resellers.
However, if you’re going to sell products at a discounted price and avoid any potential online reviews by unhappy customers who feel misled about where they bought the product, consider adding a MAP policy into your pricing strategy or simply increasing prices on certain products.
You can also offer discounts through other methods, such as setting the retail price below MAP but allowing customers to redeem discounts through not advertised codes. This way, you get to make more money while still satisfying customer needs and appeasing brand owners by staying within the rules of the minimum advertised price policy.