Suggested retail price
From Wikipedia, the free encyclopedia
The (manufacturer's) suggested retail price (MSRP or SRP), list price or recommended retail price (RRP) of a product is the price the manufacturer recommends that the retailer sell it for. The intention was to help to standardize prices among locations. While some stores always sell at below the suggested retail price, others do so only when items are on sale or closeout.
John Schwegmann, in New Orleans, and Fred Myers, in Seattle, joined together in the 1960's, and went to court. The result was the end of MSRP, and the beginning of unlimited Discounting.
Suggested pricing methods may conflict with competition theory, as it allows prices to be set higher than would otherwise be the case, potentially negatively impacting consumers. However, resale price maintenance goes further than this and is illegal in many regions.
Much of the time, stores charge less than the suggested retail price, depending upon the actual wholesale cost of each item, usually purchased in bulk from the manufacturer, or in smaller quantities through a distributor.
Suggested prices can also be manipulated to be unreasonably high, allowing retailers to use deceptive advertising by showing the excessive price and then their actual selling price, implying to customers that they are somehow getting a "discount" or a "great deal".
Contents |
[edit] MSRP in the United States
Under earlier U.S. state Fair Trade statutes, the manufacturer was able to impose a fixed price for items. These fixed prices could offer some price protection to small merchants in competition against larger retail organizations. These were determined to be in restraint of free trade. However, some manufacturers have adopted MSRP — a price at which the item is expected to sell. This may be unrealistically high, opening the market to "deep discounters" who are able to sell products substantially below the MSRP while still making a profit. Recent trends have been for manufactures to set the MSRP closer to the "street price" — the price at which items actually sell in a free market.
[edit] Automobiles
A common use for MSRP can be seen in automobile sales in the United States. Prior to the spread of manufacturer's suggested retail pricing, there were no defined prices on vehicles and car dealers were able to impose arbitrary markups, often with prices adjusted to what the salesperson thought the prospective purchaser would be willing to pay for a particular vehicle.
Currently, "sticker price" — the price of a vehicle as advertised by a particular dealer — often includes a substantial markup over the MSRP. The actual price paid to the manufacturer by the dealer (and all rebates/incentives the manufacturer provides to the dealer) are not common knowledge. In many cases sticker prices are inflated in order to give customers the feeling of getting the car for well below the sticker price after negotiations, while ensuring good profit to the dealer. It is the buyers' responsibility to be familiar with the dynamics of car sales, and to negotiate with several dealers in order to secure the deal available.
[edit] Minimum advertised price
Minimum advertised price (MAP) is the practice of restricting pricing at the consumer level. Price fixing agreements are illegal in many countries when members and terms in the agreement match predefined legal criteria. Fixed pricing established between a distributor and seller or between two or more sellers violates antitrust laws in the United States. A minimum advertised price policy between a distributor and seller is acceptable as long as it is referring to the advertised price and not the selling price.[citation needed] This does not affect a single manufacturer setting the price on a "take it or leave it" basis.[citation needed]
[edit] Rack rate
Rack rate is the travel industry term for the list price of a hotel room. While lower than the maximum rate that the hotel may be allowed to charge under local laws, it is higher than most customers can book the room for.
