A loss leader strategy involves selling a product or service at a price that is not profitable but is sold to attract new customers or to sell additional products and services to those customers. Loss leading is a common practice when a business first enters a market.

What is selling at a loss?

phrase. If a business produces something at a loss, they sell it at a price which is less than it cost them to produce it or buy it.

What is the purpose of a loss leader?

A loss leader (also leader) is a pricing strategy 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 any popular article, i.e., sold at a normal price.

What are the advantages of loss leader pricing?

The deep discount on loss leaders remove the risk a customer faces when trying a new brand. Selling a product at or below cost removes a lot of the risk an individual faces when trying out a new brand, meaning customers will be more likely to give your brand a chance.

Can a product be sold at a loss?

Under many circumstances, selling one product at a loss may drive significant value for other products. The classic example of this is inkjet printers, which for a long time have been sold at or …

Why are some goods sold below cost of production?

Some retailers sell one or more standard goods below cost and the loss so sustained is made good by selling some other product at a relatively higher price or in some other way. At times, companies sell some goods below cost to provide service to its customers or to compete in a specific product line.

What does it mean to sell a loss leader?

“Loss lead” is an item offered for sale at a reduced price that is intended to “lead” to the subsequent sale of other services or items. The loss leader is offered at a price below its minimum profit margin—not necessarily below cost.

Can a printer be sold at a loss?

Under many circumstances, selling one product at a loss may drive significant value for other products. The classic example of this is inkjet printers, which for a long time have been sold at or below cost to attract customers, who inevitably purchase high-margin ink cartridges from the manufacturer, driving significant value to the bottom line.