MAP pricing is a crucial task for a company that seeks to sell its products. It is not a simple venture where you can pick a random minimum advertised price for your products and be done with it. The price you add to your MAP policy should be thought through, and incorporate the judicious use of strategy.

How to Calculate MAP Pricing?

When you are deliberating over setting the price levels for your minimum advertised price (MAP) of your product, you need to take several different parties into consideration. The interests of retail stores (brick-and-mortar), online retailers, distributors, and any other relevant party needs to be taken into account before you can set your pricing levels. You may see that on a number of occasions, the interests of the different parties are in conflict – what may be ideal for one group may be terrible for another.

You will also need to consider several other factors while setting your MAP pricing:

  • The MAP price you set should not cut into the profits of your own company.
  • The MAP policy in place should not be violated.
  • The MAP price should reflect the reputation of your brand.
  • The MAP price should protect the equity of your brand.

Consider the Interests of the Retailers

You will need a MAP policy to protect your price and your brand from sellers who can cause it harm. In order to have a MAP policy that is legal and ethical, you will need a MAP price for every one of the products that you sell or intend to sell. The guidelines in your MAP policy apply to all of your resellers – and everyone in your channel has to advertise the products above the MAP you have set. These guidelines apply to all of your resellers – irrespective of their individual circumstances, average overhead, and any challenges they may be facing.

In the present landscape, the reseller group that faces the most challenges is the brick-and-mortar store. With the rise of online retailers, offline stores find it difficult to match prices with their new competitors. Your MAP should take this factor into account.

If your MAP price is too low, it might lead to offline store owners not carrying your products. Brick-and-mortar stores have higher overheads and limited shelf space – and if your products cannot be profitable, it would not make any sense for them to carry your line in their store.

Even with the rise of online retail stores, brick-and-mortar stores are still frequented by a huge chunk of the population. It remains a place where your customers can interact with your products, and ask questions about them. This can help turn the potential shoppers into your customers. Losing offline stores as partners could be an enormous loss to you – both in terms of profit and reputation. So when you set a minimum advertising price, keep offline stores in mind.

Determine the Ideal Wholesale Price

You should keep the wholesale price of your product in mind when you set a MAP price. While the basic tenets of commerce will tell you to have a high MAP price and a high wholesale price to maximize your profits – the ground reality is a little different.

The MAP pricing of your products is a complex issue – one that requires some thought into how your resellers operate. And one of the factors that you should pay heed to is the wholesale price you are offering your resellers because that influences the MAP pricing.

If your MAP is low and your wholesale price is high – then the profit margins the pricing brings may not be good enough to prompt resellers to stock your products. But if your MAP pricing is high and your wholesale pricing is low, then that can lead to complications. There can be retailers that offer steep discounts on your product – even if it violates your MAP policy.

Setting a wholesale price and a MAP price is a balancing act, that should consider all the relevant factors. It should allow a decent profit margin while discouraging the resellers to violate the MAP policy for profits.

Consider the Image of Your Brand

The MAP pricing should be a reflection of the image of your brand. The pricing of your products can be a key indicator of your brand and the products you sell. Therefore, the minimum advertised price you set should strategically consider the needs of your partners, as well as accomplish your goals regarding your products. The MAP price is the one that is clearly visible and advertised to the customers. Online retailers, offline stores, and other channels – this will be the price they will most likely sell the product at.

The MAP price will be a signal to the customers about the kind of brand you are, and the quality of the products that you sell. A low MAP will send the signal that your products are not of good quality. It is a well-known fact that most people associate cost with quality, and a low-cost product will be associated with low-quality. If you sell products that have a lot to offer, then a low price point can send the wrong sort of message to your potential customers.

It is also not advisable to have a MAP that is too high – unless the product you are selling is a luxury product. A high price will put your product out of the reach of most shoppers. While that can be a good strategy for exclusive products – it will dissuade most online and offline stores from carrying your product.

The Key Takeaway

While strategically considering a MAP price is crucial, MAP pricing is effective when you have a solid MAP policy and MAP enforcement in place. While it is important that you arrive at a minimum advertising price that takes your interests and the interests of your resale channels into account – a MAP policy and its enforcement will help you maintain the integrity of your brand and your products.