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▣ Business & Management·2 min·Updated Mar 13, 2026

What is Loss Leader?

Loss Leader

Quick Answer

A loss leader is a pricing strategy where a product is sold at a loss to attract customers. The goal is to increase overall sales by encouraging customers to buy additional items.

Overview

A loss leader is a marketing strategy used by businesses to draw in customers by selling certain products at a price lower than their cost. This approach aims to attract shoppers who may then purchase other, more profitable items. For example, a grocery store might sell milk at a very low price to get customers into the store, hoping they will also buy bread, eggs, and other groceries at regular prices. The effectiveness of a loss leader relies on the idea that once customers are in the store, they are likely to buy more than just the loss leader item. This can lead to increased overall sales and help businesses build customer loyalty. Retailers often use this strategy during sales events or holidays to boost foot traffic and encourage larger purchases. Loss leaders are particularly important in competitive markets where businesses need to stand out. By offering a popular product at a steep discount, companies can attract new customers and increase their market share. However, it is crucial for businesses to carefully choose which items to discount, as not all products will yield the desired results.

Frequently Asked Questions

Businesses typically select products that are popular and have a high likelihood of attracting customers. They also consider items that can lead to additional purchases, ensuring that the overall sales compensate for the loss on the discounted item.
Yes, using a loss leader strategy is legal in most places, but businesses must follow specific regulations to avoid unfair competition. It's important for companies to ensure that they are not engaging in predatory pricing that could harm competitors.
Absolutely, loss leaders can be very effective in online marketing as well. E-commerce businesses often use this strategy to attract traffic to their websites, where customers may end up purchasing additional products beyond the loss leader item.