Loss Leaders

• Retailers often advertise a limited range of products at a low, unprofitable prices in order to entice customers into their store. Once the customer is in the store they will often buy normally priced products so therefore the company will make a profit.
• Advantages:

  • Encourages customers to buy more.
  • Frequent purchase will make more profit.
  • Can be used in advertising campaigns, attracting more customers in the store.
  • Can create customer loyalty.
  • Customers may buy the reduced item in bulk, increasing sales.
• Disadvantage:

  • Can be accused of unfair business competition.