Common Questions Surrounding MAP Policies
Moving to minimum advertised pricing is a consequential decision for a brand, and involves both conceptual and practical challenges. You need to understand how MAP works, and then recognize the changes you need to make in your business practice in order to operationalize a MAP program and run it well.
Here we aim to clear your path ahead by answering some common questions about MAP policies and practice. We want you to feel knowledgeable, confident, and anxiety-free in your MAP journey.
I’ve read some things that suggest I could get into legal trouble by starting a MAP policy. Is that true? Do I need lawyers to look at my policy?
MAP is long-established as a mechanism for a brand to gain influence on its pricing at retail, and is practiced by very many successful enterprises, large and small. MAP Policy Partners can’t offer you legal advice, but we can point out the many articles online published by law firms and professional journals that explain and support the legality of MAP in the United States.
However, these and other sources agree that you have to do MAP right to stay on the good side of the law. Here are three conditions that you’ll need to pay particular attention to in your MAP activities:
- Your policy is unilateral: You alone create and enforce it; if outside sales partners formally agree to it, that might constitute illegal price fixing.
- It covers advertised price only: MAP applies to the price at which an item is advertised (i.e. publicly shown as available) for purchase—it does not restrict any party from actually selling it at some lower price. This might seem like a very fine difference, but writing a policy that makes this clear is key in—again—avoiding a perception that you’re planning illegal collusion between manufacturer and seller.
- It is enforced consistently: If you enforce MAP against one sales partner and not another, that opens you to—you guessed it—accusations of illegal collusion: fixing the market to the disadvantage of other entrants.
The decision about whether or not to pursue legal counsel in the matter of MAP naturally depends on your organization’s level of comfort in doing new things that touch on the law.
But I need my sales and distribution partners to sign my MAP policy, right?
No. Your partners should absolutely not sign your MAP policy. Although it of course involves your partners’ business, a MAP policy is not an agreement, not a contract. It’s a declaration.
If partners sign it, you might be creating an illegal price-fixing structure. The key to MAP’s legality is that your partners are incentivized to follow your pricing structure, but not contractually bound to it. That freedom on your partners’ part helps keeps you in the clear.
A barrier to our adopting a MAP policy is that our salespeople don’t like the idea. They think it will restrict their options in making sales, give them additional work, and entail unpleasant conversations with retail partners. What do we do?
Our clear experience is that MAP is a strong net positive for any brand that sells products at retail across multiple channels, and that one of its benefits is making day-to-day sales work simpler and cleaner. Without MAP, brands tend to fall into tangled web of constant, ad hoc pricing actions that inevitably feel “unfair” to some portion of their sales partners—and that interfere in consumer perception of the value of brand and products.
With MAP, questions about how to manage the demands of different sales accounts have clearer answers, and ones that come from a place of baseline “fairness”—your unilateral MAP policy.
For example, say that Retailer X and Retailer Y carry the same one of your brand’s products. Retailer X doesn’t like that Retailer Y is selling it for less. Without MAP, a salesperson’s response to this situation will probably involve disappointing one party more than the other. Then, the disappointed party may need to be assuaged, and may demand other actions on pricing or material partnership that hurt your bottom line or compromise your brand strategy. The tangled web gets more tangled—practically and emotionally.
With MAP, the answer to the complaint is simple: “Both accounts need to sell at or above the minimum advertised price for that product.” Further actions then flow from that simple position.
We analogize the implementation of MAP with that of any other new, good-sense business process. Its adoption can mean extra work, change, and maybe difficult communications. But the end result is a better state of things.
OK, but everyone I sell to wants their respective channel to “win.” They want to be special—not just to have the same treatment as everyone else. How do I handle this?
There are multiple actions you can take in response to this desire, and instituting MAP means that they tend to be strategic rather than tactical—which is probably to the benefit of your business.
A common move for a MAP brand is to give an especially valued or persistent retailer or reseller exclusivity on one of its models or pack sizes. Maybe this is a temporary arrangement, but you could even design and produce a SKU especially for this retail opportunity. Because it won’t be sold anywhere else, the seller will have a clear lane to develop business for it without having to worry about being undercut on price.
It’s probably best to do this sparingly, though. If you start giving every sales partner their own SKU, you’re surrendering significant control of your brand product strategy, and one opportunity of MAP is that you control this better yourself. With MAP, a brand can say, “These are the models that we believe fit the market and help us grow; we want you to partner with us on these models, and we’ll treat you fairly.”
More on that: because MAP takes freedom away from your sales partners on price, it may increase pressure on you to help sales happen with brand. If you can communicate to your partners that you are actively, continuously talking to consumers about the value of owning your products in terms that don’t center on price, the partners may find that their restricted freedom on pricing…isn’t such a big deal.
Finally, you can let any concerned sales partner know that you will still make promotional opportunities available. The MAP price doesn’t need to be the price for every day of the calendar.
So I can still run promotions with retailers, even if the promo price is below MAP?
It’s common practice to do this, and depending on your product category, you and your sales partners may find it to be absolutely necessary in order to drive the sales volume you want. If all your competitors are giving Black Friday deals, you don’t want to be in the position of saying, “Sorry, we can’t—because of MAP.” And you don’t have to.
As mentioned above, though, what makes your MAP policy land squarely on the right side of the law is your impartiality and fairness in administering it. If you let Retailer X run promotions all the time, and tell Retailer Y that he can’t, and give the reason for this as your being MAP-priced, it’s possible that Retailer Y would have grounds to challenge the legality of your practice.
All right, this all sounds good. What are my first steps, and how do I tell my sales partners that my brand is now a MAP brand?
Your first steps are to decide on minimum advertised prices for your products and then produce your policy. The policy should include penalties for non-compliance—ones that you are prepared to enforce. It does need to have “teeth”.
MAP Policy Partners offers templates for policies and for notifying sales partners of violations, and can work with you one-on-one to produce a policy that meets the particular needs of your business situation.
It will also be key to appoint someone within your organization as the responsible party for monitoring prices and following through on communications to sellers. You may have some sales partners who immediately adapt to your MAP policy; others may not make it a priority. The only way you can ensure fairness to all partners—and provide for general happiness around your MAP project, inside and outside your office—is to start monitoring the actual advertised prices attached to your products and following up quickly with letters to MAP violators. MAP Policy Partners offers software that can monitor your prices across the web and let you send enforcement communications with the click of a button.
Once you have your own processes set, we recommend speaking to important sales partners more informally, and with whatever “touch” works best, before sending them your formal, final policy. When you do send the final policy, you should consider including with it a letter from a company officer, president, or other executive, so that the reader understands that your brand is unified on the importance of MAP.
Best wishes on your bright, clear retail future!