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INTRODUCTORY PRICE

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Glossary
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Glossary

Definition

A loss leader is a price that is intentionally set very low—sometimes even below cost—for a visible and desirable product, with the aim of driving traffic to the store or website. The goal is not to make a profit on that product, but to attract customers who will then purchase other, more profitable items. The loss leader is a classic promotional marketing tactic.

Why it's important

  • Drive traffic: A spectacular price grabs attention and encourages consumers to come in or visit the website.
  • Attracting new customers: Introductory prices are often used to introduce the brand to customers who don't usually shop there.
  • Boosting cross-sales: Once customers are in the store, they typically purchase other products with normal profit margins, offsetting the loss on the loss leader.

A concrete example

A hypermarket is offering a 6-pack of bottled water for €1 (regular price: €3), resulting in a loss of €2 per pack. This offer is prominently featured in flyers and at the front of the aisles. As a result, store traffic increased by 20% during the week of the promotion. On average, each customer who comes in for the water buys €35 worth of related products (fruit, bread, laundry detergent, etc.) at normal margins. The cost of the loss leader (€2 loss × 10,000 packs sold = €20,000) is more than offset by the profit margin generated on the other purchases.

Key takeaways

The introductory price is subject to certain conditions:

  • A recognizable and well-known product: the offer must be immediately understandable (milk, coffee, consumer electronics).
  • Effective communication: without advertising, no one knows the introductory price. Flyers, in-store signage, and social media are essential.
  • Stock limits: To prevent customers from buying large quantities of the loss leader, retailers often limit the quantity per customer or the total stock available.

Common Mistakes

  • Loss leader: If customers buy only the loss leader and nothing else, the strategy erodes the margin without generating any profit.
  • Overusing loss leaders: Using this tactic too often damages the brand’s image and trains customers to buy only when items are on sale.
  • Cannibalizing your own sales: If the loss leader is a direct substitute for another product you normally sell, you risk losing sales without gaining any traffic.

Learn more

  • Research & Data: Price analysis to identify the most effective products in terms of introductory pricing and measure their impact on the average basket size.
  • Solutions: Promotion management to drive your introductory pricing campaigns and optimize overall profitability.
  • Tip: Operational pricing to structure your introductory pricing strategy without damaging your price image.
  • Resources: Check out our pricing FAQ for more promotional strategies.

Mini FAQ

Yes, as long as the listed price is accurate and there is sufficient inventory to meet reasonable demand. Selling at a loss is regulated but permitted under certain conditions, particularly when clearing out inventory or for perishable goods.

KVI is a strategic product for which we strive to remain competitive at all times. The promotional price is a short-term tactic—for a week or a month, for example—designed to drive traffic, often at an even more aggressive price than our standard KVI rates.

Generally, 1 to 3 products are enough. Including too many special offers dilutes their impact and makes the offer hard to understand.