Loading the player...

What is a 'Manufacturer's Suggested Retail Price - MSRP'

The manufacturer’s suggested retail price (MSRP) is the amount of money the producer of a product recommends the product be sold for in retail stores. The MSRP is not necessarily the price retailers use or the price consumers pay; items may be sold for lower prices so a company can reasonably move inventory off shelves, especially in a sluggish economy. The automotive industry is one market where the MSRP is used frequently; the price must, legally, be displayed on a sticker on the car’s windshield or on a spec sheet, and is often used by consumers to arrive at a fair price for the vehicle.

BREAKING DOWN 'Manufacturer's Suggested Retail Price - MSRP'

MSRP is also sometimes referred to as the recommended retail price (RRP) or the list price of products, and was developed to help standardize the price of goods throughout the various locations of a company’s stores. Some stores always sell at or just below the MSRP, while others do so only when the product is on sale or has been moved to clearance.

The Trouble With Suggested Pricing Methods

Using suggested pricing methods often falls into direct conflict with competition theory; the use of MSRP allows a manufacturer to set the price of a product, often higher than normal, with the potential for having a negative effect on consumers and their wallets. Another suggested pricing method sometimes used, resale price maintenance (RPM), pushes the negative effects of such methods even further than MSRP, making it highly frowned upon and illegal in many regions of the world.

Setting Prices

Every retail product can have an MSRP, though such prices are traditionally seen most heavily with automobiles. Other higher-priced goods, such as appliances and electronics, also commonly have an MSRP. Because the MSRP is set by a product’s manufacturer, it should remain constant throughout all the stores that sell it. The MSRP is supposed to be reflective of all costs incurred over the manufacturing and sales process; an average markup by retailers is also taken into account. Prices are set to allow all parties involved, that is the manufacturer, wholesaler and retailer, to make a profit from the final sale.

Frequently, retailers charge less than the MSRP, but the price charged is dependent on the wholesale cost, whether purchased in bulk from the manufacturer or in smaller quantities through a distributor. In many instances, the MSRP is manipulated to an unreasonably high figure so retailers can deceptively advertise a product, listing a much lower sale price and indicating to consumers they are getting a far better bargain than in actuality.

RELATED TERMS
  1. Retail Inventory Method

    An accounting procedure for estimating the value of a store's ...
  2. List Price

    1. The manufacturer's suggested retail price, determined by supply ...
  3. Competitive Pricing

    Setting the price of a product or service based on what the competition ...
  4. Retail Sales

    An aggregated measure of the sales of retail goods over a stated ...
  5. Exclusive Assortment

    A merchandising strategy in which a retailer displays the product ...
  6. Retail Credit Facility

    A financing method which provides loan services to retail consumers ...
Related Articles
  1. Small Business

    Explaining Manufacturer’s Suggested Retail Price

    The manufacturer’s suggested retail price (MSRP) is just what it describes – the price manufacturers recommend that retailers charge for their goods.
  2. Investing

    Consumer Spending As A Market Indicator

    What people buy and where they shop can provide valuable information about the economy.
  3. Small Business

    Understanding Forward Integration

    Forward integration happens when a business takes over functions that were originally performed by its partners farther down the supply chain.
  4. Investing

    The 4 R's Of Investing In Retail

    In retail, successfully managing return on investment (ROI) and other financial indicators is the key to a healthy business.
  5. Investing

    Choosing The Winners In The Click-And-Mortar Game

    E-tailing has changed the way consumers do nearly everything. Do you know how to pick the best retailer?
  6. 2016's 5 Most Comfortable Cars Under $30,000 (HMC, F)

    The best cars under $30,000 come in a variety of styles and sizes, from practical, compact sport utility vehicles to nimble, convertible coupes.
  7. Insights

    What is the Retail Sales Report?

    The retail sales report is a measurement of the goods that retailers sell based on a sampling of different stores.
  8. Investing

    Do Store Closures Hurt Retail Stocks? (WMT,SHLD,M)

    These eight retailers are closing stores. How many have seen stock depreciation over the past year?
  9. Small Business

    Why Traditional Retailers Keep Struggling

    Here are some core reasons that the traditional retail industry is struggling today
  10. Small Business

    Understanding Competitive Pricing

    Competitive pricing is the practice of setting prices for products or services based on what the competition charges.
RELATED FAQS
  1. What factors are the primary drivers of share prices in the retail sector?

    Find out which factors investors need to consider when evaluating companies in the retail sector, including the basic fundamentals. Read Answer >>
  2. What has the retail sector evolved to its current structure?

    Find out about the retail sector, the size of United States and global retail markets and why online retailers are changing ... Read Answer >>
  3. Why is the strategy of 'always be closing' (ABC) popular in retail sales?

    Understand how the term ''always be closing'' is related to retail sales. Learn about the benefits and drawbacks of selling ... Read Answer >>
  4. What are the primary risks an investor should consider when investing in the retail ...

    Learn about the primary risks of investing in the retail sector, such as bad economic conditions, regulation, competition ... Read Answer >>
  5. How has electronic retailing (e-tailing) changed the consumer discretionary goods ...

    Learn how electronic retailing has changed the consumer discretionary goods sector. Even physical stores are forced to invest ... Read Answer >>
  6. What is the difference between cost and price?

    Consider how cost affects a product's price. Corporate expenses and the current cost of living both impact the final sticker ... Read Answer >>
Hot Definitions
  1. Cash Flow

    The net amount of cash and cash-equivalents moving into and out of a business. Positive cash flow indicates that a company's ...
  2. PLUS Loan

    A low-cost student loan offered to parents of students currently enrolled in post-secondary education. With a PLUS Loan, ...
  3. Graduate Record Examination - GRE

    A standardized exam used to measure one's aptitude for abstract thinking in the areas of analytical writing, mathematics ...
  4. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  5. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  6. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
Trading Center