The minimum advertised pricing strategy (also known as MAP) is used by brands to prevent their retail partners from advertising their products for sale below a specific price. This technique is usually used by high-end brands to protect their brand image.
Having a sale and selling products at discounted prices is a sure way to sell them. However, it also results in the products being sold looking cheap, which do some brands more harm than good in the long term. And that’s why this pricing strategy was devised.
The termination of the contract can be under risk, if a retailer violates the minimum advertised price to which he agreed to. In some cases, this might have other legal complication.
For brands that are serious about preserving their brand image, the minimum advertised pricing strategy is a must. Not only does it help maintain their image as premium brands, it also makes the decision of buying their products at full price easier for the consumer.
If used correctly, the minimum advertised pricing strategy can be great for your brand. Not only will it help you sell your products at higher profit margins, but it’ll help you establish a reputable brand name in the long term.
To make the most out of this pricing strategy though, there are a few things that you should keep in mind.
Is Minimum Advertised Pricing Strategy Right for my Brand?
At first, the minimum advertised pricing strategy might seem like the best thing to do. After all, nobody likes selling their products at a discounted price. While this might be true in some cases, this isn’t by any means a general rule.
For some brands, lowering prices is how they can outperform their market opponents. Whether or not you should be using this pricing strategy depends mainly on the products that you’re selling.
In the case of premium brands that people buy for reasons other than the price, minimum advertised prices are recommended. Think of brands like Bose, Beats, Apple…etc. With such names, people aren’t buying the products because they are the cheapest. They just want them and are willing to pay to get them.
If you sell products that people recognize and want, this pricing strategy is one of the best ways to establish your brand image. If not, you’ll get better results from other pricing strategies.
The Minimum Advertised Pricing Strategy Works Differently Online
Ever tried buying something from an online retailer -like Amazon– and found that you couldn’t see the price until you add the product to your cart? This isn’t some glitch in the website, this is the way online retailers use to get around the minimum advertised price that’s set by the manufacturer.
As you’ve probably guessed from the name, the minimum “advertised” price is more concerned with the price that’s being advertised by the manufacturer, not how much the product is actually being sold for.
Of course, in a physical store, you can’t really sell a product without displaying the price. When selling online, however, this isn’t the case. By allowing people to see the price of a discounted product in their cart only, the vendors aren’t “advertising” the price and as a result, aren’t violating their agreements.
If you plan on using the minimum advertised pricing strategy when selling your products online, this is something that’s worth considering.
Minimum Advertised Pricing: Advantages and Disadvantages
Like all other pricing strategies, minimum advertised pricing has its own advantages and disadvantages. The following are the major ones that you’ll probably encounter when using this strategy.
Advantage: Maintaining a Premium Brand Image
People love buying things at discounted prices. However, low prices do premium brands more harm than good. If you leave it for each retailer to advertise with the prices they want, people will lose faith in the value of your product and your overall brand image.
By setting a price that all retailers must adhere to, you can maintain your premium brand image by avoiding having cheap products associated with it.
Disadvantage: Allowing Cheaper Alternatives to Penetrate Your Market
The major downside of using the minimum advertised pricing is that keeping the prices artificially inflated will allow for cheaper products to gain a foothold in the market. Since your products don’t go lower than a specific price point -when they should, cheaper models will come and fill up this gap.
Some of the customers who were willing to buy your products at discounted prices will be buying these cheaper alternatives instead.
How can Sniffie help?
Setting a minimum advertised price requires lots of market research. This research is carried out to make sure that the minimum price that you’re setting can achieve the intended outcomes. Sniffie can help you make the market research easier.
By automating the price research process, Sniffie can give you the whole picture of the market’s prices without having to dedicate too much time and resources to the process.
How to use minimum advertised pricing strategy
- Do some market research to find out the price that’s best for your brand image as well as your sales.
- Set that price as the minimum advertised price for your product.
- Take the necessary legal steps to make vendors adhere to your minimum advertised price.
- Results can be measured to make sure the set price is effective.
- Brands are using the strategy to prevent retailers advertising their products below a specific price. Under-pricing might worsen the brand image.
- Before opting for such a strategy, make sure it’s legal where you plan on using it.
- You can sell your products below MAP, but you can’t advertise them below it.
- When buying online, there are ways that merchants can use to legally get around the minimum advertised price that you’ve set.
- Before using the minimum advertised pricing strategy, ask yourself if it makes sense for your brand.