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 ?
If you're prepared to accept loss-leaders, explain why.
In which case, the scanners should be considered as loss-leaders. Many presently miffed customers may return.
These calculations feed into the level of anti-dumping duties, applied to Thai exports to make trade fairer--preventing exporters from flooding a market with loss-leaders or the fruits of domestic over-production.
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.
However, Maxwell insisted that the Scottish parliament had the power to ban loss-leaders.
The Carnival and the World Cup are obviously major loss-leaders. The resources, even of Dubai, are finite' and it is, in any case, in the nature of business that when loss-leaders have achieved their purpose, they are dropped, or another one takes their place.
"These new low prices may represent loss-leaders," notes Erik Michielsen, ABI Research's director of RFID and ubiquitous networks.
The Commissioner added that the use of sensitive foods as 'loss-leaders' to push higher demand should be stopped and that society must be prepared to pay "a fair price for quality food".
Our aim is not to offer loss-leaders but sustainable prices.'
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.
One of the problems is that chains frequently advertise hot-selling products as loss-leaders to pull people into stores.