Sunday, April 12, 2015
What Is A Loss Leader Strategy And What Do You Need To Know?
Companies use loss leaders as a method of strategic cost setting for goods and services. A loss leader is simply a product or service that a company offers under cost in an effort to attract customers. The goal of the loss leader strategy is that the loss a company takes on the product or service will be offset by the increase in additional sales from profitable items. Whether you are an online retailer, a brick and mortar storefront or a service provider the loss leader strategy may be one way to garner additional traffic that will pay off in the long run. Magazine publishers have utilized this strategy very well. They offer free issues or a highly discounted rate for the initial year in hopes the subscriber will see the value of the product, and continue their subscription at a higher rate. There are differing opinions on whether loss leader strategies are successful, and each company must carefully consider their situation and legal ramifications before offering one.
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