Many manufacturers rely on dealers and retailers to sell their products to consumers. This allows them to reach a wider market at little costs and risks, making it a favorable arrangement for all involved. Nevertheless, this also means the manufacturer has less control over the selling process, which can create several problems.
One of the biggest concerns that a brand could have is if dealers are selling their products significantly below the expected or normal price, as PriceManager.com explains. When this happens, it hurts other resellers and makes the brand less valuable in the eyes of its target market.
Imagine a nationwide retail chain offering extremely large discounts on the product. They can afford the razor thin margins, but smaller dealers will struggle to match the price and will quickly lose business. Meanwhile, customers may start thinking this new low price is the actual value of the product and that other stores are simply overcharging.
Why MAP Policies are Essential
The solution to this is a Minimum Advertising Price (MAP) policy; this prohibits dealers from advertising a price below the stated minimum. Through this, a manufacturer can maintain pricing integrity, ensure fair competition, and protect their brand’s value.
Manufacturers usually enforce the MAP policy through special monitoring software. These programs track the prices that dealers charge for the brand’s products. The software automatically issues alerts when there are violations. The manufacturer can then warn dealers and penalize them if the issue is not corrected.
Some companies even terminate contracts based on repeated MAP violations. This might seem like an extreme measure to an outsider’s perspective, but this is often necessary one to protect the brand’s interests.
Of course, there is one workaround. Manufacturers are usually only concerned about the advertised price; most of the time, dealers can still charge below the minimum price as long as they do not openly market it.The exact details and restrictions depend on the contract, so it is always important for resellers to have an in-depth understanding of it.