What Does MSRP Mean?
MSRP is an acronym that stands for manufacturer's suggested retail price. Manufacturers use MSRP as a base price to give retailers their estimated value of a product. This is not the usually the actual price of an item, but rather what the manufacturer suggests as the maximum price that the item could be expected to sell for. MSRP is used in most retail settings, such as new car sales and department stores.
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Significance
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MSRP is fairly insignificant as retailers rarely sell an item for the suggested price, and don't usually even approach it. Manufacturers don't expect most items to sell for the MSRP, and it is offered only as a baseline to get retailers "in the ballpark" when it comes to pricing. Most consumers realize that the MSRP and the actual retail price will not be the same. There are a few instances where the MSRP is an iron-clad price, such as with some software packages, but that practice is quite rare.
Function
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MSRP is usually printed on a retail box or on an item's price tag, such as on new cars. This gives the retailer and the consumer an idea of the value of an item in a negotiable environment. At other times, the MSRP is used to imply savings where a genuine discount may not exist. For example, an item might be priced as "MSRP: $200. Our price: $75." Although it is unlikely any retailer is actually attempting to sell the item for 200 dollars, this gives the appearance that the price listed is a bargain.
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Identification
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MSRP is usually clearly marked either as "MSRP" or "manufacturer's suggested retail price." Because this is a tool used by both manufacturers and retailers, it is rarely hidden when it is used. Usually, this pricing tactic is used on the price tag or box and is boldly displayed. Sometimes the MSRP itself is in large type and crossed out, while the letters MSRP are written in small print nearby. In this case, a consumer who doesn't see the letters may think that the item has been clearanced.
Effects
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In the case of new car sales, the MSRP is given as a baseline for negotiations since few buyers will purchase a car for its posted "sticker" price. The minimum sales price of a new car is rarely listed, and it is up to the consumer to make the best deal they can with the retailer. In the case of a department store or other retailer, negotiation is usually not an option. The only purpose for MSRP is this situation is to imply savings.
Considerations
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You should research large purchases, such as a new car, on the Internet or other media prior to shopping. Consumers rarely encounter situations where the MSRP is the actual price of the item in question, although some exceptions do exist. One exception is with high-quality car audio equipment, such as Alpine or Bose sound systems. In this case, and a very few others, MSRP is used to prevent competition and retailers have to sign an agreement stating that they will strictly adhere to the MSRP.
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