The Loss Leader Pricing Strategy
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NEW A loss leader strategy is a
promotional pricing tactic where a product is sold at a price below its market cost to stimulate other sales of more profitable goods or services. With this sales promotion/marketing strategy, a "leader" is typically any popular article which is sold at a low price to attract customers. The seller expects that (some/many/most) customers will purchase other items along with the loss leader and that the profit made on these items will be such that an overall profit is generated.
One can make loss leader pricing strategy profitable by:
- Placing loss leader products at the back of the shop to ensure visibility of other high margin products on offer and attract visiting customers to buy them.
- Putting high margin complimentary products near the loss leader products to attract sales.
- Building brand loyalty by keeping too-good-to-be-true loss leader prices on selected items all the time.
Please add your comments and experiences regarding loss-leader pricing. Thank you.
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