Loss Leader Strategy

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Definition of 'Loss Leader Strategy'

A loss leader strategy is a pricing tactic in which a company sells a product or service at a loss in order to attract customers to its store or website. The goal is to make up for the loss by selling other, more profitable items to those customers.

Loss leaders are often used by grocery stores, which sell items like milk, eggs, and bread at a loss in order to get people into the store. Once they're there, they're more likely to buy other items, such as meat, produce, and snacks.

Loss leaders can also be used by online retailers, who offer free shipping or deep discounts on certain items in order to attract new customers. Once those customers are on the site, they're more likely to browse and make additional purchases.

Loss leaders are a risky strategy, because the company is essentially giving away money in the hopes of making it up later. However, if it's done correctly, it can be a very effective way to increase sales and grow a business.

Here are some of the pros and cons of using a loss leader strategy:


* Can attract new customers
* Can increase sales of other products
* Can help build brand awareness


* Can be risky if the company doesn't make up for the losses
* Can lead to customer dissatisfaction if the loss leader is perceived as a bait-and-switch
* Can damage the company's reputation if the loss leader is seen as a way to take advantage of customers

Ultimately, the decision of whether or not to use a loss leader strategy is a business decision that each company must make on its own. There is no right or wrong answer, and the best strategy for one company may not be the best strategy for another.

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