Minimum Advertised Price

Table of contents

What is an Advertised Price?

An advertised price is a pricing strategy that entails setting a price for a product or service displayed or announced via a particular medium, for example, print, television, radio, or the Internet. Often, the advertised price is way below the average price of a product or service, which makes an advertised price much more appealing. The approach was designed to entice customers to make additional purchases or buy products in a bundle.

The key aspect of an advertised price is the way of its distribution. Namely, the map price is presented through mass media, and it is often established by both the manufacturer and a retailer. The crucial point about an advertised price is that it cannot be lower than the map price. Such a correlation helps the given market price and offers retailers an option for a built-in profit margin. In some instances, companies might provide negotiable advertised prices. It is a strategy of setting prices like competitors' ones and providing consumers with discounts.

Advertised Price and Minimum Advertised Price

The minimum advertised price is a special price that cannot be higher than advertised. Besides, such a price is what companies have in mind when establishing a particular threshold for the selected pricing strategy.

In 2007 the United States Supreme Court ruled that both retailers and manufacturers should work together to set a minimum advertised price. Also known as the map price, it is the lower possible price that can be advertised. However, based on the one-to-one negotiations, companies can sell the products for lower prices than the map price. Even though a more bass than the map price can be negotiated, a minimum advertised price essentially helps businesses set market prices for particular products companies to offer to clients as part of their built-in profit margin strategy.

Advertised Price and Price-Matching

An advertised price and price-matching correlate in a particular manner. Naturally, it guarantees the consumers based on the advertised price for a specific product or service. Price-matching helps establish such a price and create the conditions that will present appealing conditions for making proper purchasing decisions among consumers.

In addition, price-matching is employed when a company looks to get a competitive advantage. Specifically, suppose a competitor offers a similar product at a lower price. In that case, the business will use price-matching to lower the given price or refund the difference if the consumers have already purchased the product. There are instances when a retailer matches the advertised prices of its competitors and then adds a discount based on the percentage of the price and a buyer. At this point, price-matching in the given pricing strategy correlates to the approaches directed at getting a competitive advantage in the conditions when rivals use minimum advertised prices.

Advertised Price and Promotions

In some instances, the strategy of advertising pricing is used to get consumers' attention in the wake of some special sale events. Black Friday is a representation of such an event. In such a case, people set an advertised price to establish it in the form of promotions or “door crashers,” as they are also known. Those are items with low quantities being advertised. In this approach, companies tend to set very low prices to get shoppers into the store as soon as possible during a special sales event.

Besides, advertised price in promotions is directed not only on the product with low prices. When getting consumers to the store, companies not only want shoppers to buy products presented through promotions, but they also want to propagate more regularly-priced items while customers are still at the place shopping. Respectively, promotions in advertised pricing are the strategy helping retailers get customers into shops to purchase both advertised items and the ones represented through regular means of display.

Example of Advertised Price

There are several key examples of an advertised price. For instance, imagine there is a clothing store A. It sells jackets for $200. Yet, the A’s competitor, a clothing store Z, offers the same jackets at $180. Because of the difference, store A decides to appeal to an advertised pricing strategy. The business advertised the jacket and set a price of $170. It established the month-long sale. In addition, along with the sale and promotions, the company boosts its inventory and variety available in stores. Such an approach ensures that consumers pulled by advertised prices will also purchase other regularly-priced products.

What is the Difference Between MAP and MSRP?

While MAP is presented as a minimum advertised price, MSRP is called Manufacturer’s Suggested Retail Price. Essentially, MSRP is what the product manufacturer thinks it should be priced at. In contrast, MAP's pricing strategy only addressed product advertising.

Essentially, MAP exists to protect the MSRP. For example, if a manufacturer tries to build a premium brand, they do not want the products to be advertised at lower prices and through discounts. The key aspect is to send consumers a particular message concerning the worth of products. The primary indication is that the products are not worth the MSRP.

While minimum advertised pricing directly relates to advertising pricing, it does not offer retailers a piece of information concerning the price the products should be sold in the store. Keeping such a difference in mind, MAP and MSRP are too correlating approaches though offering different outcomes.

Conclusion

An advertised price is used to promote particular products while setting lower prices. The approach entices the customers to purchase the products at lower costs and the regularly priced products. Besides, along with the advertised price, there is a minimum advertised price setting the lower threshold for the approach.

Tags:

• Advertised Price

• Minimum Advertised Price

• Price-Matching

• Promotions

Marina Dias,

Pricing Solution Consultant at Competera