What is MSRP?
MSRP stands for Manufacturer’s Suggested Retail Price. It is the price recommended by the manufacturer for the sale of their product in retail stores. Manufacturers usually set the MSRP based on production costs, market demand, and market research. The MSRP serves as a guideline for retailers to price their products competitively while maintaining healthy profit margins.
Although MSRP is widely used in the retail industry, retailers are not legally obligated to follow the manufacturer’s suggested price. They can choose to sell the product at a higher or lower price, depending on their business strategy, competition, and customer demand. However, selling a product at a significantly lower price than the MSRP may be perceived as a low-quality product by customers or devalue the brand.
What is MAP?
MAP stands for Minimum Advertised Price. It is the lowest price a retailer can advertise a product for sale, as set by the manufacturer or the brand. The MAP is usually enforced through pricing agreements between the manufacturer and the retailer. Unlike MSRP, which serves as a pricing guideline, MAP is a policy that retailers must adhere to if they wish to carry a particular brand’s products.
The purpose of the MAP policy is to protect the brand’s value and maintain a level playing field for all retailers selling the same product. It prevents retailers from undercutting each other on price, which could lead to devaluation of the brand and hurt the manufacturer’s relationships with their retail partners. It is important to note that MAP only applies to advertised prices and not the actual selling price. Retailers can still offer discounts or promotions at the point of sale, but they cannot advertise these lower prices.
Comparing MSRP and MAP
The key difference between MSRP and MAP lies in their purpose and enforcement. MSRP is a suggested retail price that retailers can use as a guideline to price their products competitively, but they are not obligated to follow it. MAP, on the other hand, is a pricing policy enforced by manufacturers to protect their brand value and maintain a level playing field for retailers.
Let’s take an example of an online shoe store to illustrate the difference between MSRP and MAP. Suppose the manufacturer of a popular running shoe sets the MSRP at $150. The online shoe store can choose to sell the shoe at the suggested price of $150, or they could decide to price it higher or lower, depending on factors such as competition and customer demand.
However, if the manufacturer has a MAP policy in place with a minimum advertised price of $130, the online shoe store must adhere to this policy when advertising the product. They cannot run ads or display prices on their website that are lower than $130. However, they can still offer discounts or promotions at the point of sale, as long as they do not advertise these lower prices.
