Loss Leader Strategy

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Loss Leader Strategy

A business strategy whereby a company sells a product at a loss in order to sell the customer associated products for a profit. This is common when a company is new and wishes to build brand loyalty and other goodwill. For example, a grocery store may sell its bread for a loss and advertise its low price for bread in order to attract customers, who will likely then buy that same store's milk, eggs, and cheese. A loss leader strategy can be very profitable if executed properly. See also: Pricing strategy.
References in periodicals archive ?
Because of loss-leader pricing, Blockbuster's increased sell-through presence--although it may help the chain become more competitive--won't help its image on Wall Street.
Kim Motika, vice president of North American sales for publisher Interplay Productions, said loss-leader pricing increases returns.
These holiday loss-leader tactics may prove to be a two-edged sword for dot coms in 2000.
In which case, the scanners should be considered as loss-leaders.
He pointed out the Chatham-based gang used sales techniques like two-for-the-price-of-one loss-leaders to keep junkies hooked - and loyal.
They also challenge the motives of free ISPs linked to retailers such as Dixons Freeserve and TescoNet, claiming the services are used as loss-leaders to direct users to their home-shopping sites.
Martin Swaine, the boss of off-licence chain Rhythm & Booze, has called on the government to ban loss-leaders on alcohol following the collapse of Threshers into administration.
However, Maxwell insisted that the Scottish parliament had the power to ban loss-leaders.
Our aim is not to offer loss-leaders but sustainable prices.
Factors such as bulk ordering, gray-market supply, high shipping fees, clear-outs and loss-leaders can all influence retail pricing.
1) Spats between retailers about boozy loss-leaders.