Manufacturer’s Suggested Retail Price (MSRP)

What Is The Manufacturer’s Suggested Retail Price?

The Manufacturer’s Suggested Retail Price (MSRP) is the recommended selling price for a product set by the product’s manufacturers.

MSRPs are commonly used in the sale of vehicles but can be used in any other retail products.

MSRPs are also known as recommended retail price, the list price, or sticker price. The manufacturer of a product sets them to ensure uniformity in price between retail stores. The MSRP usually reflects all the costs incurred during the production process and the retailer’s potential profit from the sale of the product.

Deeper Definition

The MSRP was designed to standardize the price of goods among different retailers. However, the MRSP is not usually the actual price retailers sell the product.

Based on other factors, retailers may decide to sell a product at a price below or even higher than the MSRP. Retailers may sell a product for a price below its MSRP if they are trying to attract more customers or if they want to get rid of the product quickly.

On the other hand, a retailer may decide to sell a product at a price higher than its MSRP if the product has a high demand and low supply rate.

The buyer also uses the MSRP to start the negotiation process as the MSRP is only a recommended price.

In addition, the market price of a particular car can be used as leverage in the negotiation process. Cars with low demand usually have a market price lower than the MSRP, while those with high demand and popularity tend to be much more expensive than their MSRP.

Manufacturer’s Suggested Retail Price (MSRP) Example

When a potential car buyer visits a car dealership, the MSRP of each car is usually displayed on a sticker on the car’s windshield. Harmed with a couple of information, the buyer can negotiate this price to get a fair deal.

If the buyer knows the invoice price of his preferred car– the amount the dealership paid the car’s manufacturer for the car–he can use this piece of information to his advantage when negotiating the MSRP. The manufacturer usually sets the MSRP at a price equal to or higher than the invoice price.