What is the significance of loss leaders?
Loss leader brands or products are sold at very slim margins or at a loss, with the conscious understanding that other products in the retail outlet will make up for the loss. A mix of loss leader pricing and usual pricing could make up the overall margins. Loss leaders can be used by smaller retailers against the giant national chains to maintain their market share. It can also be used as a price segmentation tool. How is loss leadership done? Deep discounts, bundled goods, contests and price offs may all be used as loss leader pricing for a fixed period of time. If loss leadership were continuously done, the retailer would become a deep discounter, which may not be the positioning of every retailer. Loss leaders are usually popular brands and are so positioned to attract maximum attention and traffic.
