- PRICING STRATEGY: PRICE SKIMMING!
- PRICING STRATEGY: GIVING YOUR PRODUCT/SERVICE FOR FREE
- SHOULD WE COMPARE OURSELVES?
- WHAT SHOULD WE MEASURE WHEN WE EVALUATE OUR MARKETING EFFORTS?
- WHAT IS THE VALUE OF A CUSTOMER?
- DOES CONTENT MARKETING WORK?
- WHAT IS THE DIFFERENCE BETWEEN A BRAND, BRANDING, A PERSONAL BRAND AND A COMPANY/PRODUCT NAME?
- WHAT IS GROWTH HACKING?
- HOW MANY « P » CAN BE FOUND IN THE MARKETING MIX?
- THE CUSTOMER VALUE CHAIN
- HOW CAN YOU PROTECT YOUR UNIQUE PRODUCT OR SERVICE?
- CONFERENCE ON FINANCING - MAY 2, 2017
- WHAT IS DRIP PRICING?
- WHICH AMOUNT SHOULD YOU CHOOSE FOR YOUR PRICES?
- DETERMINING YOUR HOURLY RATE BASED ON THE VALUE YOU THINK YOU HAVE
- IS LOWERING YOUR PRICES A GOOD IDEA?
- TO OFFER OR NOT TO OFFER FINANCING?
- HOW TO PROTECT YOURSELF AGAINST EXCHANGE RATE RISKS
- WHEN IS A GOOD TIME TO INCREASE YOUR PRICES?
- DEMAND BASED PRICING
- WHAT IS A LOSS LEADER?
- HOW TO ORGANIZE A DRAW THE RIGHT WAY?
- HOW TO HAVE REMOTE EMPLOYEES
- IS IT GOOD TO BE FIRST IN A MARKET?
- THE THREE TYPES OF CUSTOMERS
- EXPORTING TO MEXICO - QUERETARO REGION
- DEFINING BUSINESS SUCCESS
- ARE YOU USING REBATES? WATCH OUT FOR THESE
- IS THE CUSTOMER ALWAYS RIGHT?
- EXPORTS AND QUEBEC COMPANIES
- COWORKING SPACES
- YOUR PLACE OF BUSINESS AND INTERNET
- WHY IS SOCIAL MEDIA IMPORTANT FOR YOUR BUSINESS?
- HOW TO USE FREEBIES
- WHAT IS THE MAGICAL FORMULA FOR HAVING SUCCESS IN BUSINESS?
- DO YOU HAVE EXPERIENCE IN MY FIELD?
- WHEN CAN WE STOP OUR MARKETING?
- WHAT IS A CALL TO ACTION?
- WE ARE ALL SALESPEOPLE; HERE'S HOW TO GET THERE
- HOW CAN MARKETING AND SALES COLLABORATE?
- HOW TO SELL MORE TO YOUR EXISTING CLIENTS
- WHAT IS CROSS-MARKETING?
- WHY SHOULD I SEGMENT?
- WHO IS RESPONSIBLE FOR MANAGING YOUR COMPANY'S IMAGE?
- HOW TO CHARGE FOR YOUR PRODUCTS / SERVICES?
- HOW TO DEFINE YOUR PRICING STRATEGY: PRICE POSITIONING
- HOW TO DEFINE YOUR PRICING STRATEGY: MARKET PRICING
- WHAT PRICE SHOULD YOU SELL AT? - COST-BASED PRICING
- WHAT IS A PRODUCT?
- HOW TO MARKET YOUR NEW BUSINESS?
- IS BUYING A FRANCHISE A GOOD WAY TO START A BUSINESS?
- HOW SOCIAL MEDIA HAS CHANGED WORD-OF-MOUTH
- HOW SOCIAL MEDIA HAS CHANGED PUBLIC RELATIONS
- WHAT IS BRANDING?
- WHY INCREASING SALES IS NOT THE SOLUTION
- HOW TO SELECT YOUR COMPANY NAME?
- WHY HAVING A WEBSITE IS ONLY THE BEGINNING?
- WHAT IS MARKETING?
- HOW TO MAXIMIZE THE VALUE OF YOUR SOLE PROPRIETORSHIP BUSINESS
- WHY SELLING IN MEXICO?
- LOW COST MARKETING INITIATIVES
- WHY IS PRODUCT DIFFERENCIATION IMPORTANT?
- hOW TO PRESENT OUR COMPANY
- WHAT IS THE DIFFERENCE BETWEEN MARKETING AND PUBLICITY?
- 50% OF YOUR ADVERTISING BUDGET DOES NOT PRODUCE AS MUCH AS THE REST
- RIGHT SELL AND OVER DELIVER
WHAT IS A LOSS LEADER?
This article looks into our pricing strategy series by offering an additional view of this aspect: what is a loss leader?
In order to work this strategy must have two very important things:
- the company must have a range of products/services. This strategy cannot work with a single product/service company.
- one or more of the products/services are known and have some value for the buyers.
What is unique here is the fact that the pricing strategy is considered as a whole, rather than individually. In our previous articles, we looked at some of the strategies to set a price for an individual product/service. Here we look at a group set of products/services and how to use certain components to maximize the total sales for the company.
We should define what a loss leader is. A loss leader is a product/service that is known to your customers and that holds value for them. The strategy is to offer a discount on this product/service to attract consumers to buy not only this item but the rest of the products/services that are needed with it, or needed to complete the loss leader. Let us look at some examples, because this strategy is widely used.
Printer manufacturers may be one of the best examples for this. The price of printers is very low to facilitate the purchase (the printer is the loss leader). On the other hand, the price of ink cartridges is comparatively expensive. The strategy is therefore to get the consumers to buy the printer, which will create a captive market (captivity is relative since some alternatives exist), and sell goods that are essential to the functioning of the item (the ink cartridges). Bingo!
Here is another example of loss leader usage: supermarkets. What we have here are distributors, not manufacturers, which should contrast with our previous example. The way this strategy is used here is to take key commodities from the consumer’s basket and offer them at a lower price than the competition to attract customers. The aim is to ensure that customers do not buy exclusively the items on sale, but all of their other needs too. The supermarket will have an opportunity to get back its discounted prices with items that are either at regular price or even a little more expensive than the competition.
A final example is the service industry. I get regular calls from portfolio manager representatives who offer me an analysis of my assets to see if there aren’t a few things they could do better. The analysis itself takes time and costs money to the company, but it is offered to me for free. This is the loss leader. Once you know whether you are well-equipped or not, you have entered the sales process of the company.
How can this strategy be used in your business? The best way is to analyze all your products/services and find out if you have an element that could be discounted, which would trigger the purchase of other products/services. One of the techniques used to identify this is to draw a schematic chart of your client's transformation process. The loss leader could be located at the beginning of this process. Having identified this product/service, you will attract your customer and you will be able to recuperate your discount with the purchase of other products/services.
If you have any questions or comments about this article, please do not hesitate.
Stéphane Elmaleh-Riel, B.Ed., MBA