What is Loss Leader Pricing?
Loss Leader Pricing means that a company is selling a product with a very low price, often at loss, in order to get customers interested hoping they will purchase more items with a higher profit margin.
Loss Leader Pricing can be used to build a loyal customer base with the plans of increasing the price later or to sell a product, which requires a lot of additional products, which can later be sold at a profit.
Example of Loss Leader Pricing?
For example, printers are often sold below the price, and the company makes a profit on selling ink and paper.
It is a very aggressive pricing model and is banned in many countries, as it puts smaller businesses at a significant disadvantage since they simply cannot afford to sell certain products at a loss.
