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Jennifer E. Thomas
...... .:::.:.:

It's almost like there are these periods where our relationship is smooth and steady, and then there are times when it's like standing on the edge of this gorgeous, wonderful waterfall and just letting yourself drop, knowing that there's a safe pool of water ready to catch you at bottom. You take the plunge and you're in wayyyy over your head, but oh man, it's exhilarating, it's breathtaking, it's just incredible and you feel better than you ever have before and the water is cool and refreshing and exactly what you needed.

Sam is my waterfall.

- LJ entry from 8/2005


Every Human Has Rights

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Jennifer E. Thomas [userpic]
Minimum Advertising Price police?


Here is what I do not understand about MAP pricing.

The manufacturer makes its same profit per item sold to retailers, regardless of what price those retailers then set as the final selling price.

So why the HELL do they care if, for example, Target sells a TV for $100 less than the manufacturer thinks it should sell for? Their bottom line doesn't change, only Target's does.

Can anybody explain this to me?

Borderline symptom of the day: curiouscurious

Retail is extremely complex and there are so many ways that manufacturers and stores deal with each other. Depending on the marketing contract, a manufacturer can set a price, determine how and when it goes on sale, and what the discount will be. The reason behind this is usually because the manufacturers spend huge amounts of money to position their products in the store--the better the position, the higher the price for what is known as the "slotting fee" (or, in simpler terms, rent for shelf space), but they also kick in money for advertising as well, whether locally in newspapers, or in a broader market on tv. Branding and perception of quality is extremely important to some companies. For instance, some will actually make you remove particular items from the shelf when they want to roll out new packaging or formulas, and won't let you mark them down for quick sale, but instead, return them to the manufacturer for credit. There are also instances of when something is damaged and the manufacturer will credit you fully, but will not let you sell it marked down. It's crazy, and wasteful, but many companies spend huge money trying to make their stuff seem *better* than the rest.

Aaaaah. Thanks for explaining this, I was sitting there scratching my head trying to understand it all. I only ever worked one retail job, and that for about two weeks. Other than that, I was food service. :)

There are a couple of aspects for what's basically a contractual technique for price maintenance. One, ehy2k noted: price-maintenance in the service of brand image.

There's another, grittier aspect. Suppose Target's charging less for the TVs. That limits the ability of other retailers to sell the TVs for the higher price-- folks will prefer to go to Target. That impacts the willingness of those other retailers to buy the TVs at the manufacturer's higher price. So, in the slightly longer run, it does affect demand for the manufacturer's output.