On the MAP – Minimum Advertised Price
How minimum advertised price, MAP, provides profitability and a competitive edge for independent veterinary clinics.
Leveling the playing field for independent veterinarians benefits more than just the veterinarians themselves. “If the playing field is level, then more products and services will flow through the local independent clinic,” said Rich Morris, a consultant for The Veterinary Cooperative. “This helps vendors sell more product recommended and sold by the independents. It also increases sales for both the clinic and vendors, bringing more profit to all: a win-win situation.”
One way that TVC has advocated independent veterinarians and their vendors do this is through Minimum Advertised Price, or MAP.
Morris said MAP pricing arose in the 1980s when the Supreme Court approved a pricing law that protected the consumer and small businesses. “The Supreme Court decided it was ok for a vendor to set a Minimum Advertised Price (MAP) to allow for widespread distribution of their products through multiple channels of distribution, which allows small independent businesses to thrive and be competitive from a price perspective.”
For example, a large retailer, online supplier or corporate clinic may be able to sell products at a very narrow margin and still make acceptable profit due to the volume that they sell (in business school this is often referred to as “Turns”). This essentially keeps the independent clinic (or any independent business) from selling at a competitive price and making the margin/profit they need.
So, to level the playing field, MAP was introduced. This enables small business owners to compete against the big box retailers, while it ensures that consumers have more choices about where they can purchase a product (such as a veterinary clinic). In today’s world, vendors need to have their products available online, in small, “high-end” pet stores, and independent veterinary practices, as well as the big box retailers. “All these purchasing options would not exist if the purchasing public did not prefer different ways to buy,” said Morris. “For a manufacturer to survive, they need to satisfy the consumers’ buying preference.”
‘Great for the little guys’
Morris said TVC has been working with and encouraging its vendors to implement MAP pricing “to allow independent clinics to make a reasonable profit and match the prices of the large competitors.” MAP pricing discourages diversion, and sets a price floor at which a product can be sold in the marketplace.
“We need to realize that when a company decides to MAP price, it’s great for the little guys,” said Morris. “No matter what price the big box stores get it for, they cannot sell it below the MAP price.” The “good old days” of the 50% margin have gone the way of the abacus and the typewriter, he said. “If you’re still expecting those kinds of margins you’ve got your head in the sand. It’s time now to accept it and move on.”
The key to increasing your profit is volume (Turns). By matching price to corporate competitors, independent veterinarians will build trust with clients that their pricing is in-line. “They will trust the veterinarian more on all of his or her medical recommendations as well,” Morris said.
If independents match price while making a profit, they have the edge, as most clients prefer to purchase from their local independent veterinarian when price is not an issue. “Their margin may be less than that 50% they are used to, but they will sell more products to more clients and still come away with a larger profit.”