From the Publisher's Pen
Is MAP Pricing Really the Answer?

I received yet another MAP pricing announcement this week from a vendor. Just like most fabricators, many tool distributors have also been financially hurt and are looking for ways to recover lost profits. MAP is seen by some as an "easy" Win-Win solution, but the customer always loses. For distributors that actually care about their customers and the industry, MAP pricing makes it difficult to keep customers happy.

In this economy, distributors are reluctant to raise prices because fabricators cannot and will not accept price increases, so distributors look to their vendors to make up the shortfall. Because vendors are also squeezed, they usually cannot simply reduce their prices to distributors and if they do, some distributors may choose to pass on the savings to their customers, which does nothing to eliminate the pressure that distributors are placing on vendors.

To "solve" the problem, an increasing number of vendors are resorting to "MAP Pricing." Our lawyers have advised that it is important for us to point out that MAP pricing is not illegal under current law.

MAP Pricing: Minimum Advertised Price is a policy established by a vendor that requires all distributors post and advertize the same price, which is established by the vendor. The distributors are not required to sell at that price, but are simply prohibited from posting any price lower than the MAP price.

The usual excuse given for establishing a vendor pricing program is "to protect the name" of the vendor. The real reason is to protect the distributor's profit margin and to take pressure off the vendor.

It seems to me that MAP programs are inherently deceptive because actual pricing is an essential element of information that a customer needs to make informed decisions. Because MAP pricing always inflates the true or actual price, the customer is misinformed.

Many distributors feel that MAP pricing is necessary to "protect" them from price competition. Instead of working to reduce costs and improve efficiency, it is easier to "pretend" the price is higher and hope the customer does not catch on. In the end, the market usually wins. Clumsy attempts to control the market usually fail, but it seems that people never learn.

So what can a customer do to make sure that they are getting an honest price and not paying an inflated price? One way is to call your distributor and ask them if an item is MAP priced. This is not very efficient and clearly wasteful of the customer's time. If you find wasting your time is offensive, you can of course show your displeasure by voting with your dollars. In the end, it is all about respect.

Thanks for reading,

Rich Hassert

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