A loss leader is often practiced and implemented by several companies for several reasons. Maybe this is still not often heard in the community. Even startup businessmen may still not know what this term means. But if you have been a businessman for a long time, you can know what this means. Because this term has been widely used in the business world. It often becomes a technique or strategy.
This method can be done with a specific purpose. What is certain is that this goal can provide benefits for business development. Indeed, every company generally has various strategies that it develops for profit. It includes companies that set a strategy to increase revenue. Or increase sales of products that can help business revenue. Then this loss leader strategy can also be used as a strategy, especially for product introduction. It is also often done in startup businesses to attract consumers. For more details, you can refer to the following explanation.
Definition of Loss Leader
You may wonder what the meaning or understanding of the term loss leader is. This term is a strategy carried out by setting prices below market costs. This strategy seems to be a common practice, especially for startup companies. When your business is entering the market for the first time, there is nothing wrong with doing it. This strategy will help you to introduce your product to the market.
Another way you can also introduce your company’s brand is in the middle of the market. If you can do it well then people will easily recognize your product. It is even possible that consumers then make purchases of as many products as possible. Until dependence by consumers on your product can later appear.
Loss Leader’s Goal
Every strategy carried out by a company must have a specific goal. Because every business must try to be developed in a certain way or strategy. What is certain is that each strategy is intended to help the company so that its business can develop well. If a business continues to grow, it means that the income of a company can be ascertained. At least the income can continue to increase.
In the end, big profits become the ultimate goal of every business that exists and develops in the community. The loss leader strategy also becomes a promotional strategy or product sales that have a specific purpose. That is to attract new customers. So your company can sell products to these new customers.
You may feel at first that you can’t take much advantage of this. But you can get new customers who depend on your product. So when you sell the product at a normal price, the customer will continue to buy the product until a profit is achieved.
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Loss Leader Strategy
From the understanding or meaning, you can get an idea of what a loss leader is. Besides that, you must also get an overview of how this strategy is executed through the explanation above. This strategy at first glance looks unique. Because the sale of the product is done at a price lower than the market cost. Then the impression of a low price on the product, especially for consumers.
This strategy attracts customers. The trick is to introduce new products in the community to create new customers. In the future, the company hopes to create a new customer base so that business income can be guaranteed in the future. So this is part of the marketing strategy that every businessman must do in expanding the sales of their products. Sales with this system are also carried out to stimulate sales of other products. Later the company will receive more revenue from the sale of each product.
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A Look at the Loss Leader
The loss leader strategy is related to the activity of selling products at unfavorable prices. However, this is to attract new customers to your business. Maybe, in the beginning, your company did not make a profit in carrying out this strategy. But the steps will take your business to a new market share. Loss leading is indeed a unique strategy.
But usually, the products sold are accompanied by other products that have been widely consumed by the public. So actually business losses can be avoided by your company as long as the provision of this additional product can be carried out with the right calculations.
Advantages and Disadvantages of Loss Leader
The loss leader has its advantages and disadvantages. In terms of business development, of course, this can have its impact. A loss leader or a loss leader at a glance can help all of your products sell. Pricing that tends to be lower below the market price is attractive. Especially for consumers who generally prioritize purchasing products at very low prices. So when a product is sold at a low price, many buyers will appear.
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It is not only the advantages that can be obtained from a loss leader but also the disadvantages. Because companies that sell a product at a low price cannot get the maximum profit. The profit earned could be lower. Or it could be that the company does not make a profit and even makes a loss.
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