Sales Dictionary
Loss Leader
Definition
A product sold at a loss to attract customers.
Deep Dive
A loss leader is a pricing strategy where a business sells a product or service at a price that is intentionally below its actual cost of production or normal profit margin. The primary objective is not to generate profit from the sale of that specific item, but rather to attract new customers into a store, onto a website, or to engage with a brand. This strategy is a calculated risk, betting that the initial financial loss will be offset by subsequent gains.
Examples & Use Cases
- 1A grocery store advertising milk or eggs at an extremely low price, sometimes even below cost, to draw shoppers in, hoping they'll buy other groceries with higher margins.
- 2A software company offering a free basic version of its product with limited features, enticing users to eventually upgrade to a paid premium subscription with more functionalities.
- 3An electronics retailer selling a popular video game console at a minimal profit margin or a loss, anticipating profit from the sale of games, accessories, and extended warranties.
Related Terms
Cross-sellingCustomer Acquisition Cost (CAC)Market Share