What Is MAP Pricing?
MAP Pricing or Minimum Advertised Price is a minimum amount that you expect resellers to agree not to advertise below. We see this used with Apple, HP Printers and Bose Speakers–where every outlet (retail, online, VARs) sell it for the exact same price (usually the MSRP (Manufactures Suggested Retail Price) or the MSP (Manufactures Suggested Price)–sometimes used interchangeably).
MAP pricing has a few advantages.
- Protect certain partner types. It is an attempt by the vendor to standardize pricing across their entire channel. This helps ensure the product is profitable across all channels by preventing or reducing deep discounting and making some channels non-competitive, especially if they have a store-front vs pure online. This is critical if your product sells more when the prospect can see it in, touch it, use it or hear it in retail with in-store displays. These displays can make or break certain product types–even if the prospect buys online from the store or another online outlet later.
- Maintain brand perception. MAP pricing can also protect the perception of the brand (think of the Apple, HP and Bose examples–all have a perception (real or actual) of being top-tier brands).
- Helps margins. Protects your partner’s margins–which they appreciate. It often requires that they find other advantages for prospects to buy from them, aside from price (extra items, better service, faster delivery, in-store returns, etc.).
Is it Needed?
With most software, there is little MAP pricing and the MSRP is used as a starting point as the street price or the discount for the reseller. You would give the resellers a discount or margin off of the MSRP (i.e., 30% off list). Of course, some retailers and distributors will speak in terms of “Points” but I won’t use that here (see Reseller Margins).
Most SaaS applications have a list price (many are publicly available) and the reseller gets paid a commission off that price (apx. 70% pay a commission, while 30% allow the partners to purchase at a discount and keep the margin)–so MAP pricing isn’t used.
Resellers often want the right to lower the price to compete (especially if their operation has efficiencies allowing them to be more profitable than competitors even if discounted), while many vendors want their street price (actual price sold) to match their MSRP.
The vendor can and should enforce their MAP policies and can impose penalties for violation (less inventory, less MDF or co-op, worse terms, terminate the authorization. Some vendors won’t support products that are not sold through authorized (i.e., grey market) partners. Even Amazon will often remove resellers if they are not authorized and their customers cannot receive warranty support because of it.
MAP is a “Policy”
It is important to realize that MAP pricing is a one-way policy between the reseller and the vendor. It is not “supposed” to fix the price–since that can be perceived as violating antitrust price-fixing laws. The reseller can still negotiate and sell below the MAP–they just can’t advertise this pricing. We sometimes see this as “See Price in Cart” where you may see a lower price. While some retailers like Best Buy will advertise at the MSRP–but then throw in a $100 gift card, or bundle other products with it (using bundles and “extras” which reduces the overall price).
The following are a few simple MAP policies. You can search Google to find the MAP pricing for HP, Apple, and others to see how they word their policies. The first sample is an indirect approach to impose MAP pricing, the second is a more straight forward, comprehensive treatment.
Sample # 1
Reseller Prices. The prices a reseller pays for Products and Services will be set by the Company. Subject to the Company’s ability to impose maximum resale price and minimum advertised price limitations, the reseller is free to determine its resale prices unilaterally.
Special Pricing. The company may provide Reseller with special pricing, rebates, discounts, offers, promotions, or other special incentive programs Reseller in whole or in part (“Company Programs”). Such Company programs will be limited to Resale made to one or more End Users. Any such Company Programs must be in writing, which includes email notification from Company, and must specify a fixed time period during which such Company Program will be provided.
If no time limit is specified in writing, the time period shall be ninety (90) days from the effective date of such Company Program. Company may condition any such Company Program on VAR’s agreement not to resell the Products and Services subject to the Company Program at or above particular prices determined by Company. No such condition will prohibit VAR from selling at any price below the prices established by Company.
Sample # 2
Minimum Advertised Price Policy
The Company understands the need for its resellers to retain profits from the retail sales of its products. Accordingly, the Company has adopted this pricing and advertising policy.
Resellers who are eligible for Co-op funds and are advertising any Company product must comply with Company’s unilateral Minimum Advertised Price (“MAP”) policy. This policy does not extend to a Reseller’s actual resale price, which Reseller sets in its sole discretion.
The company has not, cannot and will not make any agreements with any Reseller either expressly or by implication, concerning the resale prices of the products that Company sells. The company acknowledges that each Reseller is free to determine its own retail prices and to advertise such prices.
Similarly, Company has the right to determine the Resellers to which Company sells, and reserves the right to discontinue, and is formally announcing here that it has adopted this policy for its Resellers to follow. The company will uniformly and unilaterally implement the terms of this policy to those Resellers who fail to conform to the MAP policy.
Company also reserves the right at any time to change either this policy or the list of products to which it applies by adding or deleting products or modifying the MAP levels. Company will notify Resellers, in writing, in advance of any changes.
The Reseller’s entire organization is responsible for compliance with this policy. If any single location within a Reseller’s organization violates any component of this MAP policy, the consequence will apply to the entire organization.
Should Reseller work with other organizations in an affiliate relationship, both Reselling organizations must be Company Authorized Resellers. It is considered a violation of the MAP policy if a Reseller has advertised below MAP through an unauthorized affiliated company.
MAP policy applies to all forms of external advertising including, but not limited to:
- Print ads (inserts, magazines, newspapers, posters, etc.)
- Broadcast (radio and TV)
- Direct Mailers, including email
- Internet (banner ads, broadcast emails, destination pages, third-party sites)
MAP policy does not apply to the following:
- In-store displays, banners or price markings provided they are not externally visible
- Quotes, contracts, price lists provided for purposes of consummating a transaction as opposed to the solicitation
Products to which MAP applies will be noted on the Company’s Price Lists posted with the company’s web portal and with any Distributors (excludes Retail products). The MAP price for each Product must be no less than the Suggested Retail Price indicated on the company’s web portal.
- Resellers advertising a Company product governed by MAP must show the MAP price in close proximity to the Product or not show any price.
- Deviations of up to one dollar ($1) below MAP are permitted to allow for various pricing conventions to be met.
- Advertising without any reference to price does not violate the policy.
- “Call for Price” or “Too low to show” advertising does not violate the policy.
- MAP “struck out” (example: $299) is considered a violation of the policy.
- Promises of price matching or beating competition prices do not violate the policy.
Reseller bundled promotions do not violate the policy as long as the following criteria are met:
- If a price for the Company Product is noted in the ad, the Company MAP must be used.
- If the Company Product is being given away free as part of a bundle, the value (MAP) of the Company Product must be listed in the ad. Additionally, it must be listed in conjunction with the product, and not the footnote.
- Rebates are not considered MAP compliant.
Note that Company bundles are subject to the General Map Rules above. Moreover, Company may sponsor promotions and rebates. During such periods, ads may include the promotional MAP or rebate, subject to the General Map Rules above.
Internet Advertised Pricing
Price advertising on the Internet must also comply with MAP on generally accessible web pages. A price that is listed on the front page of Reseller’s website, or the front page of a section (e.g.: computers, electronics, handhelds, etc.) within the Reseller’s website must comply with MAP.
Should the Company Product be viewed as the result of utilizing the search function, the first time the product appears as a result of that search, the price shown must be MAP compliant. Additionally, listings on shopper’s sites and “paid for” advertising must follow MAP guidelines.
A “catalog” format on your site that lists the product, product description and “buy or purchase” button is not considered advertising and is considered your selling price (as long as it is not the front page of your website or front page of a section and the requirements of the previous paragraph are met).
This MAP policy may be changed by Company at any time at its sole discretion. The Reseller will be notified in writing by email or by posting on the portal web site of any changes.
Non-compliance of MAP Policy
Non-compliance with this unilateral MAP Policy is considered a violation of Company’s Reseller Policies and will subject the Reseller to forfeiture of Co-op funds for a period of four months, calculated based on Co-op accrued during the one month immediately preceding and the three months following the publication or initial display of the price advertisement.
If Reseller can show that a violation was due to a system error or misinterpretation of the MAP policy, then Company may grant an exception to the penalty, no more than once per 12-month period. If an exception is granted, the Reseller must correct the non-compliance within one (1) business day. If the error is on a website, the advertised price must be changed. If the error is in print, a retraction must be printed.
Company will notify the Reseller in writing of the non-compliance.
MAP Policy Questions
MAP compliance is the responsibility of the Reseller. All questions should be in writing and submitted to the channel manager working with your account. The only Company Representative authorized to answer questions regarding this MAP policy is the MAP Policy Administrator:
No other Company employee may answer questions about this Policy or modify this Policy.
Because this MAP Policy is a unilateral policy of Company, Company will not respond to complaints of resellers regarding the terms and conditions of this Policy. All other responses to questions will be made within five (5) business days from receipt of the question. In the absence of a response from Company, the ad placement is at Reseller’s own risk.
Because of legal constraints, no Company reseller should discuss this policy, or its retail prices, with any other Company reseller.
Note the clause for a reseller not to complain. In doing so it may be considered a negotiation, it which case it may not be considered a unilateral policy. Here is an interesting article dealing with some of the legalities of MAP price.