As an ecommerce company, you may find yourself struggling if your pricing isn’t well thought through.
After all, success when operating on the digital shelf means you should already be competitively priced and ready to go.
We appreciate it’s sometimes easier said than done, though. You’ll first need to consider different pricing policies and decide which one is best for your business.
In this article, we look at the debate around MSRP vs MAP pricing and provide a clearer picture of what these two pricing models can offer.
What does MSRP mean?
MSRP stands for ‘manufacturer’s suggested retail price’, whilst MAP pricing stands for ‘minimum advertised price’.
By law, manufacturers can’t technically give an amount at which to price your products. Instead, they make a suggestion (MSRP) and sometimes also agree on a minimum advertised price (MAP).
Across the globe, countries use MSRP and MAP pricing policies to stay competitive within their markets. However, some regions – such as the EU and UK – do not permit MAP pricing on the grounds that it breaches their competition laws.
Is selling price the same as MSRP?
It’s important to understand that selling price and MSRP can be the same, but they often vary. There’s a very good reason for this.
Imagine a product displayed on your digital shelf. If it has an MSRP of $20 and you go on to sell it for that amount, the selling price and MSRP will be the same.
However, profits usually come from the markups companies put on their products. Say you sell the same product but mark it up by 20% over MSRP, the MSRP will still be $20, but the product now has a selling price of $24.
Does MSRP include tax?
MSRP does not include tax or any other costs associated with the purchase of a particular product.
It’s your responsibility as a business owner to ensure that VAT, sales taxes and additional charges are accounted for during the customer’s purchasing journey.
MAP pricing vs MSRP: Which is better for your brand?
Wondering where you stand on the whole MAP pricing vs MSRP debate? Start by asking yourself the following questions:
1) What do customers gain?
Listing the MSRP price of your products when retailers sell them for the same amount or less ensures customer satisfaction at the time of purchase.
With the MSRP recommendation as a reference point, shoppers know they’re getting a good (or better) deal.
2) Is it legal?
As alluded to earlier, MAP pricing is perfectly legal in some countries, like the US; however, in the UK and the EU especially, it’s best avoided. Otherwise, your business could suffer severe penalties.
In the UK, MSRP is referred to as the recommended retail price (RRP). RRPs are fine, providing that retailers still have the option to trade at whatever price they want.
3) Can each policy be enforced?
Unfortunately, even with proper implementation, there are no legal grounds for enforcing MSRP or MAP pricing.
However, there are certain MAP enforcement steps you can take at a business level, such as withdrawing perks from offending retailers, revoking their authorisation status and, crucially, preventing them from buying your products again.
4) How will brand perception be affected?
Price and quality go hand in hand for most shoppers, and if your products are priced below their MSRP, this could make them lose value.
Implementing an effective strategy based on MSRP will help maintain a positive brand image while protecting manufacturer profit margins as well as your own.
5) Would both be better?
Establishing MAP pricing and MSRP policies creates a two-pronged defence against those who might undercut your sales online.
Both MAP and MSRP have their benefits, but together they provide greater protection for your brand, helping to generate more consistent, profitable growth.
Leveraging MAP pricing vs MSRP with Magpie DBX
With Magpie DBX, price tracking couldn’t be simpler. It offers a one-stop shop for 24/7 reporting on both your own products and those of your competitors, as well as providing searchable, filterable results.
You can even see price trends over time and get alerts when prices change, ensuring your business remains competitive.
Think Magpie could help you decide between MAP pricing vs MSRP? Get in touch with us and request a demo today!