MAP Pricing: What Does It Mean To Dropshipping Businesses?
You might have heard or read about MAP pricing, but still aren’t sure exactly what it is and how it relates to you and your online drop ship business.
Here is the definition of Map pricing according to retail.about.com:MAP (Minimum Advertised Price) is a suppliers pricing policy that does not permit its resellers to advertise prices below some specified amount. It can include the resellers' retail price as well.
In other words, MAP pricing keeps competitors from battling too fiercely and having price wars.
A price war happens when businesses competing in the same market niche of products lower advertised prices, trying to undercut the competition.
This is really great for buyers, but bad for the manufacturers, suppliers and drop ship resellers because it affects profit and also devalues the product.
It also affects the reputation of the product and its maker, because extremely low prices tend to make the public think that there is something inherently wrong with the product. This is known as brand degradation, and it’s not pretty.
Now, as to how MAP pricing affects you and your internet drop ship business, it’s actually simple:
You cannot get a product from your wholesale product drop ship supplier and advertise it at below the Minimum Advertised Price.
By the same token, neither can anybody else.
So, this keeps things pretty competitive, as well as basically fair. In ecommerce, as in any retail business; a level playing field makes sure that the Little Guy gets the same breaks as the huge corporations.
Now, here is one catch to MAP pricing that you should know about and take into account: You’ll notice that it’s an acronym for “Minimum Advertised Price.”
This means that although you can’t advertise a product below the MAP price, you can still sell it below the MAP price. Tricky, huh, and maybe a bit confusing?
This is how it works---have you seen the things on internet retail sites where instead of displaying a price by a product, it says “Price too low to show” or “Add to cart to see price”?
This is how you can sell an item below the MAP price. You didn’t advertise it below the MAP price, but when a customer adds it to their shopping cart, it becomes a private transaction. Then, the item can be sold below that MAP price.
Since you can’t advertise and undercut the MAP price, and neither can your competitor, the main difference between the two of you for prospective customers will be the perceived value of the product.
This is what separates the sheep from the goats, so to speak.
In order to be at the top in sales of a product that others are selling and promoting, it is imperative that visitors to your online business get the feeling of added perceived value when buying from you.
Remember, there is a big difference between actual value and perceived value!
You are the only one who can increase the perceived value of any product sold on your drop ship website.
Many times, your competitors won’t make the extra push or the increased effort to add to the perceived value of what they sell. So, if you do---you’ll be one up on them!