What are examples of loss-leader pricing?
When a supermarket advertises a food, often a food that is very widely consumed (like soda, basic vegetables, or meat) at a price lower than they paid (or, at least, below their normal level of profit). Consumers who see the advertisement will be inclined to take a specific trip to the store to purchasethe loss-leader. Once the person is in the store, they are likely to buy other things, including those at regular price. If this brings in people who would not otherwise have come to the store, or gets them to buy things they would not otherwise buy, they store can actually make enough profit on the other items to make up for the loss they are taking on the loss-leader.
Loss leader pricing places the price of stuff at levels lower than necessary to make a profit, hoping they’ll sell you other stuff by getting you in the door. They also call loss leaders “door busters” for this reason. In consumer electronics, computers are frequently loss leaders, while the respective service plans, equipment and tech support make up for the loss the store incurs by selling them.
