Manufacturer's Suggested Retail Price (MSRP)
What it is:
A manufacturer's suggested retail price (MSRP) is a price that a product manufacturer tells retailers to charge for their products.
How it works (Example):
Let's say Company XYZ manufactures the "Hot Stuff" line of men's clothing. Hot Stuff is a prestigious, exclusive brand sold only at high-end department stores. Company XYZ works very hard to support this high-end image for the brand, and discounting does not accomplish that goal. Accordingly, it requires its customers to sell its products at the MSRP, and to reinforce this it preprints prices on its tags before sending clothing to retailers. Company XYZ also does not allow retailers to mark Hot Stuff products down by more than 5% at any time.
Why it Matters:
In many cases, MSRP is a suggestion from the manufacturer to the retailer. In other cases, as in our example, the MSRP is an important part of branding and relationships. However, most of the time, retailers willingly mark things down below MSRP in order to entice customers, gain a competitive advantage or get rid of old inventory.
