An Overview of Minimum Advertised Pricing
Marketing has been one of the most important aspects of business since the evolution of currency. Over the years, marketing has gone through major changes. First, people put up flyers around town and might have purchased ad space in a local newspaper. Then, with the advent of TV and radio, people shifted their focus to TV commercials and radio spots. Now, the focus is on digital marketing, as people tend to use the internet to find goods and services today. One of the issues in marketing that has persisted even to this day is called minimum advertised pricing. There are a few important points regarding minimum advertised pricing that everyone should know.
What is Minimum Advertised Pricing?
Often shortened to map pricing, minimum advertised pricing is the lowest price at which a retailer can advertise a product. To be clear, this does not mean that the retailer cannot sell it for a price lower than this. They simply cannot advertise that the product is for sale for a price lower than the minimum advertised price.
For example, if a car dealer is advertising a BMW, there might be a minimum advertised pricing standard for BMW that it cannot be advertised for sale for less than $40,000. The car dealer can still negotiate a price lower than this in the store; however, if the BMW is advertised, this is the lowest price at which it can be advertised.
Is Minimum Advertised Pricing Legal?
The answer is, yes. This is legal under the various laws in the United. This idea of minimum advertised pricing only refers to the ads themselves and not to the product. It does not impact the price at which a retailer can sell something in the store. Therefore, this practice legal.
The reason why it is in place is that it serves as a form of protection for manufacturers. For example, if someone sees an ad for that BMW above for $30,000, they will quickly realize that the MSRP they see on TV (of $40,000) is inflated or otherwise too high. When this happens, nobody is ever going to buy the product at the MSRP again. This is going to severely hurt the value of the product and will quickly contribute to something known as brand erosion, where the public loses faith in the brand itself. This is one of the major reasons why minimum advertised pricing is in place.
How Does This Work on the Internet?
Many people are concerned about how minimum advertised pricing works on the internet. When the product is advertised online, minimum advertised pricing is still in place as long as the manufacturers list one.
On the other hand, the price that is displayed in a shopping cart is not subject to the rules surrounding minimum advertised pricing, according to the FTC. The FTC says that the price in the shopping cart is no advertising. Therefore, the shopping cart in an online store is very similar to a shopping cart in any other physical store. Because minimum advertised pricing doesn’t apply to someone’s physical shopping cart, it doesn’t apply to the internet as well.
Online stores say this is fine because they add a disclaimer that says the price is displayed in the shopping cart instead of on the product’s website. So far, this has worked well. The regulations surrounding minimum advertised pricing with regard to the online world are still evolving.
The Future of Minimum Advertised Pricing
These are a few of the most important points that people need to remember when it comes to minimum advertised pricing. There are penalties for advertising a price that is below minimum advertised pricing. The biggest penalty is that the manufacturer has the right to pull all of its products from someone’s store. Therefore, it is important for every store to be aware of any minimum advertised pricing regulations that might apply to their products.
