We’ve all seen the big ads for common products with prices that are much lower than normal—these are called loss leaders. Supermarkets, liquor stores, and big discount stores are notorious for offering this type of promotion on a regular basis. But how can a small business use this tactic?
The main purpose of loss leaders is to get the consumer in the store or calling to order the low-priced items, so that they then purchase upgrades or other products at the regular price. The question for a small business is, do you have enough other products to make this worthwhile? Or will customers just purchase the loss leader and nothing else? Can you upsell or offer add-ons or accessories?
If you have nothing else to entice the customer to buy in addition to the sale item, then this strategy is not for your business. The people who buy from these sales are not doing it out of loyalty, and they are likely to be only one-time customers. You need to make additional sales while you have them there in person or on the phone. You may not have a second chance.
If you decide you want to attempt a loss-leader strategy, contact your big suppliers to negotiate a deal for lower prices on a bigger order. Explain your plan to them, and they should be able to help you with lower costs. You may even be able to get them to deliver some items on consignment, just for your promotion. You probably don’t want to use items that will spoil or have expiration dates on them, though—if you don’t sell them all, what will you do with them? Also, you shouldn’t use the same product or service as a loss leader too often, or your regular price will mean nothing. Offer
and test different items to see which ones bring the biggest crowds and then use those twice a year.