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 ?
During the debate, Coun Tom Ansell said a combination of supermarkets selling drink as a loss leader, the smoking ban and breweries charging publicans high prices were to blame for the decline of pubs.
"The book directly competes with annual publications by large publishers who sell the book for a very cheap price as a loss leader. Our book is not that.
Sins Of Commission * Gubernatorial Lotharios * Drinking with DeLay The Lobbyist's Loss Leader * Right-Sizing and Wrong-Sizing
By the 1980s, however, Andersen and the other major accounting firms turned the basic audit service into a loss leader to their consulting services.
''Therefore, in the early stages, they could afford the national airline to be a loss leader to open it up to competition, never mind if it is losing left and right now.
The Xbox, however, will be Microsoft's biggest loss leader ever, losing about $125 per unit, according to published reports.
However, Sony is planning to sell the console as a loss leader and make profits on DVDs, CD-ROMs and later, network downloads.
Chairman Arthur Levitt, as well as senior SEC staff, warned the profession about making financial statement audits a loss leader to attract lucrative consulting engagements.
Introducing or liquidating items are legitimate below cost sales opportunities, while loss leader sales are prohibited.
While I suspect that a portion of this amount resulted from a "loss leader" by the security firm in its effort to win the borough's initial bid, I believe that a practical savings of 25 to 30 percent could be realistic for many jurisdictions.
AA: Contract tax management engagements are not priced as a "loss leader." Since price is only part of the equation, the issue is value for fees.
Many traditional health care products are in decline, as evidenced by the fact that last year's "cash cow" can be today's "loss leader." Finding new combinations of existing resources (tactics) in current markets is no longer the key to survival and growth.