There are a lot of acronyms in retail pricing. If you’re trying to figure out what various pricing policies and agreements mean and what they’re for, it can be confusing.
Two common acronyms you run into in the world of retail are MAP policies and MSRP.
Here’s a quick look at what these terms are and what purpose they serve.
What is an MSRP?
An MSRP is the “manufacturer’s suggested retail price.” It’s essentially a guidepost that lets consumers and sellers decide: is this a fair price for this product?
Also known as the list price or “sticker price,” the MSRP doesn’t have to be followed by sellers. And if they bundle your product or provide additional services, they may charge people more. (If they charge people more without providing more though, they’ll be far less competitive.)
An MSRP is also definitely not a minimum price. It’s not legally binding, and it’s more like a benchmark for the consumer than a restriction for the seller. The only real restriction it provides is that it contributes to consumerism: your customers know the fair value of your product, so if a seller charges them more, they better be offering more.
What is a MAP policy?
MAP stands for “minimum advertised price,” and a MAP policy is a legal document brands use to define the lowest possible price a product can legally be advertised for. It doesn’t just set the minimum, though. MAP policies also outline penalties for violating the minimum advertised price and the process to follow if a seller is found in violation.
A MAP policy is intended to protect against price erosion, and what we call “race-to-the-bottom” pricing, where every seller has to decrease their price in order to stay competitive until they’re essentially selling at-cost.
MAP policies should always be created with the help of a lawyer. They’re situation-specific, so brands should never use a generic, cookie-cutter MAP policy. A lawyer can help you craft a policy that fits your goals and needs.
(Not sure if you need a MAP policy? Here’s how to tell.)
The difference between MSRP and MAP Pricing
A helpful way to think about the difference is that an MSRP is like an unofficial upper limit for your price, and your MAP is an official lower limit for your price. An MSRP is aimed at the consumer, and a MAP is aimed at the retailer.
The consequences for going above the MSRP, on the other hand, is likely just a loss of sales as the natural result of competition.
The consequences for going below the MAP depends on the MAP policy, but could range from a temporary ban from selling the product, the inability to order more stock, or termination of the seller relationship.