An Introduction to the Different Reseller Pricing Policies

Issues we’ll explore in this module:

What are the main types of reseller pricing policies?

How are they similar and how do they differ?

How can you determine which is right for your company?

Many manufacturers and brand owners refer to the broad concept of establishing and enforcing pricing guidelines for their resale partners as a “MAP program” or a “MAP policy.” MAP—short for Minimum Advertised Price—is often used as a catchall term to describe any program designed to influence the retail prices of a brand’s products. But in reality, there are several types of reseller pricing policies, and MAP is just one of them.

In this module, we’ll introduce you to the most common types of reseller pricing policies and help you understand why a given company would choose one of these policies over another (or why they would develop more than one).

5 commonly used reseller pricing policies

1. MAP (Minimum Advertised Price) policy

As the name suggests, a Minimum Advertised Price (MAP) policy helps a brand establish a floor on the prices at which its retail partners are allowed to advertise the company’s products. And although a MAP policy seeks to influence only its resellers’ advertised pricing, it leaves those resellers free to actually sell the company’s products for any amount they wish.

In other words, MAP addresses only public pricing by retailers, such as on their websites or sales pages at online marketplaces such as Amazon. Once a retailer begins a one-on-one conversation with a shopper—at the cash register of a physical store, for example, or in a private email with a prospective customer—a MAP policy leaves the retailer complete freedom to sell the product for any price it wishes. 

Why would a manufacturer choose a MAP policy?

Typically, a manufacturer or brand owner will select MAP as their reseller pricing policy if their primary concern is preventing public price erosion because they fear this will harm the public’s perception of their brand. 

One final note about MAP: When it comes to any reseller pricing policy, the format the policy takes can be an important element to consider, because creating a policy in the wrong way can put a manufacturer in legal jeopardy under antitrust laws.

For most reseller pricing policies, including MAP, the safest approach is to develop a unilateral policy—meaning drafting your policy as a one-way statement that your resellers may either follow or not. In other words, generally speaking you do not want to structure your MAP policy as an agreement that your resellers must sign (or even verbally agree to), because this could actually be deemed an illegal act of “price fixing” or “restraint of trade” favoring some of your resellers at the expense of others. 

You can and should include consequences for failing to follow the guidelines spelled out in your MAP policy, as long as you are still leaving it up to each retailer in your channel as to whether or not they choose to comply. 

There is one caveat here: Unlike some of the other policies we’ll discuss next, MAP addresses only the advertised price (sometimes also called the “offer” or the “offered price”) and actually leaves retailers free to sell a manufacturer’s product for any price it wants. Because of that distinction, a two-way MAP agreement could in some cases be deemed legal by regulators or an antitrust court, who might determine that it doesn’t constitute illegal price fixing.

In practice, however, it is still strategically advantageous to structure MAP as a one-way policy rather than as an agreement, for two reasons: 

• Antitrust regulators tend to view one-way policies far more favorably than two-way agreements, so this is a legally safer approach. 
• From a business and logistical standpoint, structuring MAP as a one-way statement will make updating the policy far easier and less time-consuming, because with a two-way agreement you will need an updated signature from every retailer in your network every time you make a change to your policy.

2. MRP (Minimum Resale or Retail Price) policy

A Minimum Resale (or Retail) Price policy, or “MRP,” is similar to MAP but broader in that it allows the manufacturer to set a retail floor not only for advertised prices but also for the actual retail sale price of its products.

Because MRP policies set guidelines for the selling price of a manufacturer’s products, these policies absolutely must be drafted and enforced as one-way statements rather than two-way agreements—because an agreement to establish a selling-price minimum would represent the textbook definition of price fixing.

Why would a manufacturer choose an MRP policy?

When a manufacturer is concerned not only with how its products are being advertised but also the prices at which they are being sold, they will opt for an MRP policy over a MAP policy. MRP policies are popular, for example, with luxury-goods makers, because these companies do not want customers to discover that they can acquire the company’s products anywhere for steeply discounted prices. 

One final note: MRP is often also described as a Unilateral Price Policy (UPP). Whenever you see a reseller policy described as a UPP (or sometimes simply as a UP, or Unilateral Policy), you can think of it as an MRP.

3. MSRP (Manufacturer’s Suggested Retail Price)

A Manufacturer’s Suggested Retail Price (MRSP) simply represents the price a manufacturer or brand suggests it retailers sell a product for.

In the case of cars, MSRP is also called the sticker price, and few cars are actually sold for that amount. Manufacturers expect retailers will allow for some negotiation with customers and will sell their products below the MSRP. In fact, part of the reason for establishing an MSRP and making it public—as with a car’s sticker price—is to give their retail partners some wiggle room in terms of negotiating that will still allow them to maintain their profit margins, and to give customers a sense of control in knocking down the “retail” price to an amount they’re more comfortable with.

Actually, establishing an MSRP helps a manufacturer accomplish several other goals as well. For example:

• An MSRP allows the manufacturer to standardize a products retail price across the company’s entire resale channel.
  This allows the manufacturer to protect the interests of all its retailers, particularly the brick-and-mortar store chains carrying the company’s products, from being unfairly undersold by competitors.

• An MRSP also helps the manufacturer establish a price that takes into account all costs required to sell the product.
  In other words, with an MSRP the manufacturer can mark up the retail price to a level that allows it to ensure every partner in the distribution chain (distributors, wholesalers, retailers) can earn a profit.

• An MRSP helps the manufacturer safeguard its brand over time.
  Finally, just as manufacturers establish MAP policies in part to protect their brand’s perceived value, an MSRP also helps a manufacturer protect its brand over time, keeping its retail prices at levels that signify a quality brand.

How do MAP and MSRP differ, and how can they work together?

Whereas a MAP policy offers guidance to retailers only on the prices they at which they advertise a brand’s products, MSRP also addresses the actual selling price. In this way, an MSRP policy is closer to an MRP (Minimum Retail Price) policy than a MAP policy. 

A manufacturer can have both a MAP and an MSRP, and the company should format both as one-way statements (“unilateral policies”) and not as agreements. Indeed, this is the safest way legally to structure any reseller pricing policy. 

With an MSRP, a manufacturer lets its retail partners know how much it wants them selling its products for. At the same time, the MSRP sends a signal to all of these retailers that their competitors who are also selling the same products will face penalties for violating the manufacturer’s suggested retail pricing. That means each partner will feel more confident setting its retail price at the MSRP level.

An MSRP can work even more effectively when a manufacturer also enforces a MAP policy. When these policies are used together, the manufacturer signals to its retail partners both the price at which they suggest retailers sell its products as well as the lowest amount they’ll be allowed to advertise those products. This will further standardize the products’ prices across the resale channel and give every retailer a fair chance to compete for sales.

4. iMAP (Internet Minimum Advertised Price) policy

The “i” in iMAP stands for Internet, meaning iMAP is a narrow policy that sets a floor only on retailers’ advertised prices online (on eCommerce pages and online marketplaces, in web-based ads, etc.).

The same rules that apply to a general MAP policy also apply to an iMAP, meaning retailers are ultimately free to actually sell a manufacturer’s products for any price they choose, as long as their online advertised prices don’t fall below the amounts listed in the iMAP policy. 

If a retailer wanted, it could advertise a brand’s products for prices below the iMAP in print ads or even, according to some interpretations of these policies, in electronic communications to its customers and prospects such as via text message. The only restriction here is that it cannot advertise products anywhere on the Internet for below the iMAP-specified prices.  

Why would a manufacturer choose an iMAP policy?

If a manufacturer were concerned primarily with online price erosion—either because of the potential for brand damage or because it could undermine the margins of important retail partners—the company might opt for an iMAP policy. 

Note: A manufacturer can choose to have several of these different policies, so publishing an iMAP policy will not preclude you from also having a MAP or an MRP to establish offline advertised or even retail-sale price minimums with your retail partners. 

5. eMAP (Electronic Minimum Advertised Price) policy

The “e” in eMAP stands for electronic, meaning an eMAP policy covers all electronic channels a reseller might use to advertise a manufacturer’s products—not only through web ads and online sales pages but also using methods such as email and text messages to customers.

Note: Again, you can have both an eMAP policy and a standard MAP. This might be a smart strategy if, for example, you have resellers that do not sell your products online or using any electronic means, and you don’t want to clutter your standard MAP policy for them with lots of guidelines about marketing channels they don’t use.