loss leader

what is a loss leader?

Advantages

• The seller makes a larger profit
• Is a good form of advertisement
• can be used to clear spare stock

Disadvantages

• The seller might lose profit if not monitored
• by retaining a deep discount, the customer may receive the impression that
• the product should always have a lower price
• if the price is unusually good, and for a necessary item the customer might
• purchase the highest possible quality of the item.

examples of loss leaders pricing strategy

• when apple Computer reduces the prices on its latest products, savvy apple
• know a new product is round the corner
• with a changing season and the need to attract customers shopping for back-to-school clothes, department stores 
• advertise discounts on summer clothes, back yard barbecue cooking and table
• wares to make way for the accumulation of winter holiday shopping merchandise