Savvy Shoppers Know "Minimum Advertised Price" Isn't Always the Bottom Line
If you're the type of consumer who pores over print ads and scours the Internet looking for the best price on what you need, you may be frustrated to find certain products advertised at exactly the same price everywhere you look. How can it be that every electronics store in the country is selling the plasma television set you've had your eye on for $3,999? What ever happened to competition?
The fact is retailers still are vying for your business, though they can't always be as up front about it as they'd like. A manufacturer-imposed policy called "minimum advertised pricing" (MAP) can tie retailers' hands when it comes to promoting lower prices on some products. But shoppers who understand how MAP works know that the advertised price isn't always the bottom line, and they often walk away with the deal they were looking for all along.
MAP benefits manufacturers and retailers
On everything from appliances and computers to electronics and sporting goods, manufacturers are setting minimum prices at which authorized dealers can advertise their products. And retailers, for the most part, appear to comply with MAP guidelines. What are producers and sellers gaining from the arrangement?
By imposing a minimum advertised price, manufacturers help the little guys compete.
One benefit for smaller, independent retailers is a more level playing field that allows them to compete with national chains and big "discounters." If major retailers were able to lure droves of consumers by constantly positioning popular products as "loss leaders," the mom-and-pop shops would fold.
Jay Knick, co-owner of Sonoma Outfitters, an outdoor equipment and clothing specialty store in Santa Rosa, Calif., acknowledges that by imposing a minimum advertised price, manufacturers help the little guys compete. Knick explains that, especially for businesses like his, where employees often spend hours educating and fitting a single customer, it's important to have some protection against prospective buyers being able to leave the shop and find a better price at a local mega-store or through a quick Internet search.
In this case, what's good for the retailer is also good for the manufacturer. Losing smaller outlets because they couldn't compete may not be a big blow for the company that makes a product as simple as, say, hammocks. But manufacturers producing higher-end products that require a more intensive one-on-one selling process--like kayaks and gourmet stoves--can't afford to lose the specialty shops, which often are the most direct and effective link to their consumer market. By imposing a minimum advertised price, producers protect these crucial outlets and their representation in the market.
Manufacturers cannot legally dictate resale prices.
Does the consumer benefit from MAP? If you like to patronize independent retailers, if you appreciate the expert product information and one-on-one customer service that small specialty shops typically provide, and if you sometimes return to the store for product support after you've made your purchase, then you probably would benefit from MAP. According to Knick, smaller stores have to make a certain margin (the difference between product cost and selling price) to cover their higher overhead (the cost of maintaining the store). MAP allows them to do that without pricing themselves out of the market.
Some rebates are for as much as 25% of the total sales price.
Not everyone thinks MAP is a good idea. Some retailers--including Internet sellers, which have much lower overhead than brick-and-mortar stores--would prefer to compete without any pricing constraints. Why do these retailers still comply with MAP?
Some MAP policies are tied directly to advertising subsidies that the manufacturer offers its retailers. If the retailers want those funds, they must play by the manufacturer's rules.
Other retailers believe that undercutting the manufacturer's minimum advertised price would risk losing the store's "authorized dealer" status. As Patrick Roach, a deputy assistant director in the Federal Trade Commission's Bureau of Competition, Washington, D.C., explains, while manufacturers cannot legally dictate resale prices, they can choose whom to do business with--and a retailer discounting its product may not be part of the manufacturer's overall distribution plan.
Consumers can find their way around the MAP
Though some stores will charge you the full advertised price, others have found ways to comply with MAP guidelines while winning customers over with better deals. Here are five ways savvy shoppers can pay less than the minimum advertised price:
Some retailers only offer their best price in person.
Roach points out that, in cases where a typical MAP policy is in effect, you shouldn't necessarily take the advertised price at face value. Make an offer.
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