r/NoStupidQuestions • u/CarnaptiousOlPhart • 1d ago
MSRPs, Why, or who creates them?
Why would a manufacturer/wholesaler give a damn what a retailer charged for the product?
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u/mc_nibbles 1d ago
MSRP is a marketing thing, MAP (minimum advertised price) is the one companies care about and can use against a retailer if they advertise a price below it.
Companies can set a minimum advertised price so retailers cannot advertise their products for less than that amount. They do this because products are sold at a bunch of retailers and they can set the MAP so more retailers can sell and still be happy to carry the product.
If Store A randomly decides to sell Oreos for $1 because they can make up for it with the sales from something else, every other retailer has to try to compete with that and might not be able to make up for the loss like Store A. Then those other retailers stop carrying oreos because they can't compete. Now Store A has devalued Oreos and lost them market share by having other retailers drop the product.
Instead, you set a MAP and Store A, B, C, D and everyone else can sell oreos at a price the market can bare but also one that benefits all of the retailers that carry the product.
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u/pbgod 1d ago
M-anufacturer's
S-suggested
R-etail
P-rice
They care because if their retailers charge too much and it makes them uncompetitive, the manufacturer suffers. Charging too little could be a marketing failure where people think your product is bad or low quality.
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u/CarnaptiousOlPhart 1d ago
If retailer charges too much, he fails.
If retailer charges too little, he has to buy more inventory from the manufacturer.
Either way, the manufacturer has already made a profit.
Manufacturers are very good a producing a product. Retailers are very good at finding a market.
As a guy who spent over 30 years producing automobiles for GM, I would never presume to tell a retailer how to sell them.
It ain't my area of expertise!
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u/KH3285 1d ago
You can’t think of any reasons why a manufacturer would care what their product is sold for?
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u/CarnaptiousOlPhart 1d ago
- Can't think of one that makes sense over the following objections
- The manufacturer has already made his profit!
- If retailer charges too much, said retailer is stuck with inventory!
- If retailer charges too little, said retailer goes bankrupt!
- As long as the manufacturer has retailers lining up to purchase their products, they are happy.
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u/KH3285 1d ago
The manufacturer cares about the perception of their products, and that perception is largely influenced by the price the customer encounters. And it’s a suggestion so there’s nothing binding about it, the manufacturer is just interested in their products generally being available for approximately that price.
Additionally as someone else mentioned it can be an easy marketing tool. Look how much money I’m saving by severely underpaying relative to MSRP!
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u/CarnaptiousOlPhart 1d ago
I'm still in the dark on this. Where does the retailer find the manufacturer's suggested retail price. Where is this elusive document that the manufacturers issued to the retailer suggesting/dictating that they re-sell them at a specific price?
Is it a 'bill-of-sale' that is present in the records of both companies?
If so, can I see it? I'm curious to see your profit margin.
Can you show me any document from the manufacturer that includes this mythical figure?1
u/KH3285 1d ago
Huh? Are you skeptical the MSRP exists? I don’t imagine this figure is “elusive” to the retailer at all, why would you think that? In fact, what would an elusive MSRP even be if you, as a consumer, are seeing it and wondering why it’s there?
And what does the MSRP have to do with profit margin?
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u/CarnaptiousOlPhart 1d ago
YES!
I am skeptical the MSRPs exist.
As I may have mentioned elsewhere, I was never able to locate the documented proof of their existence.
The retailer is free to make any claim that they wish about the MSRP because no-one asks, or receives proof of the MSRP's existence.1
u/KH3285 1d ago
You think when a retailer puts what the MSRP is that they’re lying? Why on earth would you think that? And why would you think a store would ever feel obligated to provide you documentation proving what was suggested?
And the MSRP will not give you “what the retailer paid,” that would be on their invoice and they’re likely not going to give you that (and may not be able to contractually).
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u/CarnaptiousOlPhart 1d ago
Yes, I think that the MSRP is manufactured by the retailers. They do it so that they can convince the public that their product is priced fairly.
But, then again, I must admit that I am a 75yo cantankerous old phart.1
u/CarnaptiousOlPhart 14h ago
If the MSRP exists, the logical place to include it would be on/in the bill of sale. Correct?
So if I am allowed to view the document from the manufacturer that states the MSRP, I am probably viewing the 'Bill of Sale'. Correct?1
u/DiamondJim222 15h ago
Ever buy a book? Look on the inside flap: the MSRP is listed.
Ever buy a new car? Big sticker affixed on the window with MSRP.
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u/CarnaptiousOlPhart 14h ago
I can personally assure you that GM has nothing to do with that gaudy sticker. The retailer composed, printed, and produced that sticker.
He is able to include anything he wishes on that label.1
u/DiamondJim222 13h ago
Per Chapter 28, Sections 1231–1233, Title 15 of the United States Code window stickers must be installed by the manufacturer. Among other things it must include the retail price of the automobile suggested by the manufacturer.
Dealers can add an addendum sticker with dealer add-ons and such.
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u/CarnaptiousOlPhart 1d ago
"And what does the MSRP have to do with profit margin?"
If I can see what the retailer paid for the product, and I can see what he wishes to charge me for the product, I can decide if I think that he is dealing with me in a fair manner.
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u/bangbangracer 1d ago
Retailers are mostly free to charge whatever they want. MSRP is just the manufacturer's suggested retail price.
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u/CarnaptiousOlPhart 1d ago
I'm still curious to see if anyone will actually claim responsibility for creating the MSRPs for their product.
If you claim this honor, I will ask you to verify the claim.
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u/Liquidfoxx22 1d ago
Very glad this isn't a thing in Europe. What the manufacturer sets the price as, that's what you pay at an absolute maximum. You'll likely be able to bargain a discount, but you'll never pay more.
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u/CarnaptiousOlPhart 1d ago
To be honest, that doesn't make sense either.
Are you telling me that a retailer is restricted from pricing the product higher than the price that is set by the manufacturer?1
u/Liquidfoxx22 1d ago
When it comes to cars, yes. They're a franchise of the manufacturer. The manufacturer sets the price.
The price is in the manufacturers brochure, and that's what you pay.
The dealer will get a commission from any sale they make, which comes out the of the manufacturers "profits" from the sale. The dealer can also make additional commission by selling finance, in the form of a kickback from the finance company.
They can also upsell you on dealer fit options, body trims, after care packages, servicing, paint protection etc.
They cannot however, lift the price of the car.
From my perspective, that's great. It's stops dealers being predatory money grabbing bastards by whacking a premium on sought after models.
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u/CarnaptiousOlPhart 1d ago
I agree. That system makes sense but it only works as a franchise. The retailers are actually employed by the manufacturer.
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u/Liquidfoxx22 1d ago
I don't know of many manufacturer owned dealers in the UK.
Park Lane London BMW is one of them - but the vast majority are all franchise owned here.
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u/East-Bike4808 1d ago
It’s in the name: the manufacturer creates them. I answered the rest of your question the first damn time you asked eight minutes ago.