Loss Leader

A loss leader is a strategic pricing tool employed by businesses to draw customers into their stores or onto their websites by offering a product at a price lower than its cost, thereby incurring a loss on that specific item. This tactic is not merely about selling a single product at a loss; rather, it is a calculated move designed to stimulate additional sales of higher-margin items. By attracting customers with an irresistible deal, businesses aim to increase foot traffic and encourage shoppers to browse and purchase other, more profitable products. This strategy is particularly effective in retail environments where the initial attraction of a low-priced item can lead to impulse buying or upselling opportunities. For example, a grocery store might offer milk at a loss to draw shoppers in, with the expectation that they will also purchase other groceries at regular prices. The benefits of using a loss leader strategy include increased brand awareness, customer loyalty, and the potential to capture market share from competitors. Furthermore, it can help clear out old inventory or introduce new products to consumers. However, it requires careful planning to ensure that the overall sales and profit margins compensate for the initial loss, making it a powerful tool when used wisely within a comprehensive sales strategy.