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The Ultimate Guide to Understanding & Complying with a MAP Policy on Amazon
Whether you’re a manufacturer or reseller, driving sales and maximizing profitability for the products in your inventory requires an environment that can maintain profit margins and strengthen a brand’s value. Fortunately, brands have several tools at their disposal to attract resellers and give prospective buyers confidence.
Two of the most common among e-commerce retailers are the Manufacturer’s Suggested Retail Price and the Minimum Advertised Price policy. MSRP and MAP, as they are respectively known, are policies that every company should be familiar with. While MSRP is a familiar pricing tool, MAP can be more confusing to brands. However, any retailer that relies on Amazon as a sales channel should understand the pros and cons of utilizing a MAP policy and know how to build one that works.
What is a MAP policy?
True to the name, a Minimum Advertised Price (MAP) is the minimum price a retailer can advertise for a product they sell. The MAP is set by the brand and should include a margin allowing retailers to profit reasonably. It applies to any retailer who carries the item and is intended to level the competition among sellers and avoid price wars. It can also provide brand protection against devaluation in the process.
Minimum Advertised Price or MAP differs from MSRP in that it is designed to exert more control over the actions of resellers. It should be noted that a MAP pricing policy does not dictate the final sales price of a product. It only addresses the advertised pricing used by a retailer. In the case of brick-and-mortar stores, a lower price can be offered once the customer visits. Similarly, an online retailer can comply with MAP agreements by requiring additional clicks, such as adding a product to the shopping cart to see a final price that includes discounts.
This flexibility in sales price, and the fact that it’s not a MAP agreement as much as a unilateral MAP policy, is what makes Minimum Advertised Pricing different from illegal price-fixing. Instead, a successful MAP policy encourages healthy competition among sellers by allowing those with value-added services to avoid being undercut by less customer-focused stores emphasizing volume and the lowest price over expert staff.
Implementing MAP pricing is a more in-depth process than setting an MSRP. Brands should produce a written MAP policy to provide to retailers and will often benefit from legal expertise to help draft the document. In any event, the MAP policy must be consistently enforced across all of a manufacturer’s sales channels and include specific consequences for violations.
Brands should also be aware that the laws regarding MAP pricing may differ in countries outside the U.S. In addition, a MAP policy that discourages stores from stocking competing products or favors a particular retailer may run afoul of the law. Experienced advice about the legal implications of MAP policy is extremely valuable during the drafting process.
Utilizing MAP Pricing on Amazon is complicated
Unfortunately, Amazon does not proactively enforce a MAP pricing policy and, in some cases, can be guilty of violations itself. Your brand’s relationship with Amazon will determine the platform’s role in your Amazon MAP policy.
Currently, there are two main avenues for brands to sell on Amazon. Vendor Central (1P) Amazon sellers supply their products wholesale to Amazon, which handles pricing and logistics. Seller Central (3P) Amazon sellers use the marketplace to sell directly to their customers and set their pricing. In some cases, brands may also distribute products to authorized resellers or rely on Amazon to sell the product.
In any of these scenarios, competition for the Buy Box can create price wars and a race to the bottom. When one reseller opts to go below an established MAP price, others will follow suit, which can quickly eat into your profits. Therefore, monitoring and enforcing MAP violations diligently as they arise is critical.
A strong pricing policy is still essential on Amazon
Even though they shouldn’t count on Amazon’s help enforcing MAP, all brands should take a deliberate approach to price. As e-commerce continues its rapid growth, pricing policies will become more important for retailers and manufacturers. Online sales will likely continue their growth trend while consolidating among the largest online retailers, including Amazon. As this happens, the desire of smaller resellers to compete with industry leaders is more likely to lead to destructive price wars for products that aren’t backed by effective pricing strategies.
An effective Amazon pricing policy can help companies create mutually-beneficial relationships with retailers and shoppers. Resellers will appreciate the support from the brand that protects their margins. At the same time, consumers will enjoy more confidence in the value of a product and a less frustrating shopping experience due to the consistency across both e-commerce and brick-and-mortar stores.
In addition to the positive impacts a successful pricing strategy can have on a company’s retailers and customers, there are also substantial benefits for the brand. Prioritizing margins and protecting retailers from price wars increases a brand’s value in several ways.
First and foremost, an effective pricing policy can enhance profits by avoiding short-term price wars and making the company a more attractive partner for retailers. The market awareness required to implement and monitor pricing policies can also result in less competition from businesses that will likely seek out more vulnerable targets. Relatedly, well-executed pricing policies will likely lead to greater market share as brand image improves and accessibility increases.
Minimum Advertised Price is only one piece of the pricing puzzle
A company is typically best served by utilizing an MSRP and a MAP policy since they address pricing in different areas of the manufacturer-reseller relationship.
An MSRP showcases the value of a product and demonstrates a brand’s commitment to the profit margin of its resellers. It provides the foundation of a pricing strategy but does little to discourage tactics that most manufacturers, and their distributors, would like to avoid.
Instead of focusing on just one type of pricing policy, brands should pursue a comprehensive strategy that will be continually evaluated and adjusted as necessary. MSRP and MAP policies can work together to create the advantages a manufacturer desires from their pricing strategy. This includes a fairer environment for competition, discouragement of unauthorized sellers, support for more sustainable growth, and increased profitability.
Customize your MAP policy to meet your needs
Once a brand decides setting a Minimum Advertised Price is the appropriate strategy for their business, it’s time to draft a policy, or possibly policies, that reflect the company’s goals and the product’s value. Designing a customized MAP policy rather than relying on a generic template is one of the best ways to ensure the outcome meets your expectations.
Brands need to pay close attention to the policy details. It should explain clearly the types of advertising that will be covered by it and include a plan to encourage participation. It also needs to communicate to authorized sellers the consequences of non-compliance.
While MAP policies traditionally applied to physical stores carrying a brand’s products, the age of e-commerce has resulted in more specific variations of MAP. Offline advertising such as direct mail, tv or radio, and billboards are no longer the only concern. Today, sellers may adjust their policy for different types of retailers and use a specific agreement that more aptly covers how sales are promoted online. When building a MAP policy for your brand, you will want to consider all the possible MAP pricing approaches required to protect your products. In addition to conventional MAP policies, a brand may also use:
iMAP (Internet Minimum Advertised Price) Policy – an iMAP policy addresses Internet-based advertising such as online display advertising and website sales pages. However, it would not govern other marketing methods that an online retailer might use.
eMAP (Electronic Minimum Advertised Price) Policy – Brands looking for broader protection might instead opt for an eMAP. In addition to online advertisements and listings, this pricing strategy would also set the rules for other types of electronic communications. It would likely include emails or text messages, for example.
The details of your policy can also be a helpful tool for enforcement. Consider integrating features that make your MAP strategies seem more like a partnership than a demand.
A co-op advertising or distribution fund that rewards sellers who follow the rules is one of the ways that brands can reduce violations and foster goodwill. Rewarding authorized retailers for following the rules with this type of support can offset the damage done by unauthorized sellers or stores that undercut your MAP policy.
Another way to strengthen effective MAP pricing is by viewing your policy through the eyes of the authorized seller, not just the brand. Additional pricing flexibility during promotional seasons and exemptions for events such as Black Friday or other relevant holiday sales can provide authorized retailers with an opportunity to boost traffic. You can also make eligibility for these exceptions dependent on living up to the MAP policy requirements during the rest of the year.
Ultimately, enforcement of a MAP policy will also be easier if it includes not just the rules but also the consequences that a violation will incur. A warning for first offenses is a common approach, and many brands implement a three-strike system with escalating penalties. For example, preventing the seller from receiving more products for a period of time, followed by reducing the number of products available to them, and finally revoking their standing as an authorized retailer
While implementing these punishments can seem severe and have negative financial consequences for your brand, they will likely pay for themselves over time as your MAP policy becomes more potent.
Watch out for these types of MAP violations
Once you have a firm MAP policy in place, the real work begins. To ensure pricing compliance, you’ll need effective MAP monitoring tools to safeguard the integrity of your policy. It can be time-consuming to patrol physical stores and online retailers, like Amazon and Google shopping, so be prepared to have the resources and team to do so correctly. Also, remember that platforms hosting retailers, as is the case with Amazon, may not be active participants in your efforts to address violations.
That’s why you need a firm MAP policy and a proactive approach that emphasizes short- and long-term consistency. Sometimes, a brand opts for a dedicated person or team to take on this responsibility. There are also software options available that are designed to identify violations and respond to them automatically.
Of course, vigilance in MAP enforcement requires knowing what you’re looking for. Typically this is either unauthorized sellers or underpriced products from authorized sellers. While the inappropriate actions are essentially the same, they can mandate a drastically different approach.
A traditional MAP violation occurs when an authorized reseller advertises a product for sale at a price below the minimum price set in the MAP agreement by the manufacturer. Sometimes, this can be an intentional decision by the retailer as they try to compete against other sellers. These retailers may believe that the benefits of breaking the rules will outweigh the consequences. For brands with weak monitoring of their MAP policies, sellers may not think they will even be caught.
In other instances, violations frequently result when a seller relies on an automated pricing system. If one retailer undermines MAP pricing, these automated systems may quickly follow suit. The result can be an escalating number of violations, all triggered by a single bad actor, and possibly even a price war that does long-term damage to brand identity.
Of course, not all MAP violations are created equally. For example, unauthorized retailers won’t be influenced by the incentives a MAP pricing policy offers authorized retailers and probably won’t be aware of the consequences a brand has defined for violations. As a result, they are more likely to disregard any MAP policy a brand may have.
For active brands, participating in the Amazon Brand Registry is a necessary first step to preventing any unauthorized seller. Doing so opens up access to Amazon resources for a manufacturer that can protect trademarks and products. Regardless, companies must also have a well-designed process to ensure products are only available to approved sellers and stay wary of those attempting to profit off counterfeit or expired products.
Have a plan for MAP enforcement
As mentioned, it’s critical that pricing policies include specific consequences for violations when it comes to an authorized seller. And it’s even more crucial that those provisions are followed as laid out in the policy whenever an issue is identified. Uneven MSRP or MAP enforcement can lead to legal consequences for the manufacturer and result in unenforceable pricing strategies.
Remember that Amazon is unlikely to intervene in pricing disputes with an authorized reseller. Amazon’s position is that these are internal business issues that don’t negatively affect the marketplace or consumers. In fact, the company has stated it believes an Amazon seller competing on price will benefit customers. In their view, even if it upsets the manufacturer, it is still good for the marketplace.
Regardless of how you discover a MAP violation, you will also need a plan to deal with them once they are identified. If the violator is an Amazon seller, you’ll first want to confirm who they are. Doing so could require substantial research and possibly ordering the product from them to help track it back through your distribution channels.
If you find it is an unauthorized reseller, you can take appropriate steps to remove them from the site. However, since you can’t count on Amazon to manage your MAP enforcement with authorized resellers, you’ll need to communicate your MAP violation directly and with clear evidence to the Amazon seller. You may start with a warning or offer the seller an opportunity to explain. Still, you should be prepared to enact the consequences described in your MAP policy for egregious or repeat violations.
Strengthen your MAP policy with Amify
Developing, monitoring and enforcing a Minimum Advertised Price policy is a commitment that many companies struggle with. It’s not unusual for the responsibilities that come with a successful MAP strategy to be neglected in favor of other priorities.
Fortunately, Amify has an experienced team ready to offer the expertise that can fill the knowledge gaps and resource shortfalls in your e-commerce business. We can be a full-service Amazon partner that gets results. Contact us today to learn how we can help you reach your growth goals.