Benefit from using a Loss Leader Strategy

By Robert Cyr

There is a strategy in retail marketing which employs the use of a "loss leader" product or

simply put a product sold at, below or just above cost to elicit consumer interest.

Lets take a look at some loss leader examples:

Your local grocery store routinely utilizes the loss leader strategy to get you through the front doors. Watch for low prices on staple items including laundry soap, toilet paper and OTC (over the counter) drugs. The theory here is simple, you are drawn to the store to buy a few products at great pricing and before you leave you fill up the cart with other merchandise. It is not uncommon to place loss leader items at the back of the store that way you are forced to view other products (at everyday pricing) before checkout.

New Car Dealerships will continuously advertise vehicles at a very attractive price in print advertising. Look closely at the promotion and you will notice that the special pricing applies to only one vehicle or "One at this price". Dealerships will usually advertise the exact VIN (Vehicle Identification Number) of the "Loss Leader" and if you are not the first customer to purchase this vehicle you will then be encouraged to view other makes and models at the dealership. The coined phrase, "Bait and switch" comes to mind here.

Car dealerships use the loss leader strategy to peak interest and bring in a steady flow of potential car buyers.

Online or mail order music and DVD retailers advertise promotions which will offer the ability for consumers to purchase 10 DVDS or CD's at an unheard of price of one penny each! Who can resist this? Well, the fine print states you agree to purchase an additional amount of DVD's or CD's at regular pricing, plus shipping and handling within a specific time frame after the initial purchase.

Cellular phone providers will use the loss leader technique offering free cell phones to entice consumers. In order to qualify for a free phone you must sign a twelve or 24 month contract with the carrier and this is where the cellular company makes up for the initial giveaway.

The examples above illustrate the use of loss leader techniques and while you might be a small retailer, online seller or even a flea market vendor your business can benefit from the use of the loss leader strategy.

As a retailer you should always be on the lookout for wholesale pricing which will allow you to buy at a deep discount. Check with your suppliers on a regular basis for specials or closeouts which will allow to buy a particular item to use in your loss leader promotion.

This post brought to you by:

The Closeout Industry - offers a wealth of information centered around wholesale closeout merchandise. Author and consultant, Robert Cyr has educated thousands of entrepreneurs offering advice relating to

sourcing name brand merchandise far below wholesale pricing.