INTRODUCTORY PRICE

Definition

An introductory price is a price that is intentionally set very low—sometimes even below the cost of goods—for a prominent 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 products. 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 only the loss leader in large quantities, retailers often limit the quantity per customer or the total stock.

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

See our solution: pricing strategy development.