In the world of e-commerce and e-business, you will likely encounter two particular pricing policies. The first of these two strategies is MAP, or minimum advertised pricing. MAP refers to when manufacturers prohibit retailers from advertising and reselling their products at a price point lower than what they have instated. The second strategy is competitive pricing. Competitive pricing affords retailers the opportunity of advertising products at a price of their choice. While there are arguments for and against both policies, the ultimate goal of anyone operating an e-commerce business is to remain profitable.
In order to level the e-commerce playing field, many manufacturers and suppliers have adopted the policy of decreeing a minimum advertised price across their product line. Retailers that do not abide by said pricing plan risk the chance of severing a trustworthy relationship with a particular manufacturer, which may drastically reduce profits and sales depending upon the scope and success of the line. Slashing prices, posting ‘call for pricing details’ notes on product pages, and operating sneaky email blasts represent black-hat tactics often used to undermine MAP policies simply to make a sale. Despite the minimal profit margin (if any) that these dishonest methods may reward retailers with, there are many businesses that will disregard the policy in order to steal a sale from a competitor. While MAP policies can save retailers time in regard to developing competitive pricing strategies, they can frustrate consumers. Because the Internet has virtually revolutionized the way that consumers are able to comparison shop, it can be discouraging when there is no potential for a deal or discount on the horizon. However, aside from some negative connotations, MAP policies can function to guarantee healthy margins across a vast amount of product. Many manufacturers will institute keystone pricing, which is doubling the wholesale cost. The extra profits can be funneled into marketing, advertising, and branding efforts in order to more effectively grow business.
Competitive pricing strategies require intense competitor research and calculations. While you may want to advertise the lowest price on a particular product in order to gain the loyalty and business of your consumers, you will also want to ensure that you’re still making a profit on the sale. If you slash your prices too low, then you will inevitably put the future of your business in jeopardy. However, competitive prices can lead to a higher volume of sales as well as more immediate sales conversions. The reduction in price point that your company is able to offer will depend upon your company overhead and your overall sales goals. If you have minimal overhead, then you may be able to charge a little bit less than a company with a greater amount of cost factors. Some retailers will offer price match guarantees on their sites in order to persuade a consumer to purchase from them. Because competitor prices can be tedious and overwhelming to monitor, price match guarantees offer an efficient way of enticing consumer business.
Despite the pricing strategy, it is important to consider your overall business goals and company overhead as you price your product lines. Determining a strategy that will fit in with your business model will help to effectively dictate the success of your company.