Which pricing strategy involves selling a product at a loss to attract customers?

Which pricing strategy involves selling a product at a loss to attract customers?

• A. Cost Plus Pricing
• B. Loss Leader Pricing
• C. Public Relations
• D. Sales Promotion

Answer: (B)

Loss-leader pricing is a strategy where a product is sold at a loss to attract customers into a store or onto a website. The idea is that drawing people in with a very low price on one item will lead them to buy other items that have higher margins, making the overall sale profitable. This approach is common in supermarkets and electronics retailers, where a cheap staple can bring shoppers who then purchase more profitable items like branded groceries, accessories, or complementary goods. The key is that the loss on the attracting item is balanced by the profits from additional purchases, though it carries the risk if the extra sales don’t happen as expected. Cost plus pricing, by contrast, simply adds a markup to the cost to set the selling price, not aimed at drawing customers in through a deliberate loss. Public relations focuses on managing the business’s image and communication, not on pricing strategies. Sales promotions involve temporary price reductions or incentives to boost demand, but they don’t inherently mean selling a product at a loss to attract customers for the sake of increasing overall sales.

Loss-leader pricing is a strategy where a product is sold at a loss to attract customers into a store or onto a website. The idea is that drawing people in with a very low price on one item will lead them to buy other items that have higher margins, making the overall sale profitable. This approach is common in supermarkets and electronics retailers, where a cheap staple can bring shoppers who then purchase more profitable items like branded groceries, accessories, or complementary goods. The key is that the loss on the attracting item is balanced by the profits from additional purchases, though it carries the risk if the extra sales don’t happen as expected.

Cost plus pricing, by contrast, simply adds a markup to the cost to set the selling price, not aimed at drawing customers in through a deliberate loss. Public relations focuses on managing the business’s image and communication, not on pricing strategies. Sales promotions involve temporary price reductions or incentives to boost demand, but they don’t inherently mean selling a product at a loss to attract customers for the sake of increasing overall sales.