Loss leaders are goods or services offered at steep discounts (generally below cost) in order to attract new customers to a store. It is a time-honored practice that has been met with much success, especially by large discount retailers. The intent of this pricing strategy is to not only having the customer buy the (loss leader) sale item, but other products that are not discounted.
Precision Tune Auto Care's main loss leader is the oil change. In our city, you can get an oil change there for about twenty bucks. If you change your own oil, you'll pay between twelve and twenty dollars for five quarts of oil and an oil filter. As you can see, it's a loss leader.
For dentists the loss leader is usually a teeth cleaning or free x-rays or a combination of the two.
Your local grocery store usually publishes its loss leaders in the paper or in their circular ads. Popular loss leaders for them are products like Coke, Dr. Pepper, Pepsi or other beverages.
A loss leader for a bank is free checking and free checks. I recently got ad-letter from Chase Bank. They are willing to give me $50 if I open an account there.
A loss leader for your cell phone company is your cell phone. They will give phones away all day long in order to get people to sign up for two years.
If you decide to use a loss leader to get new business, be smart and never get sideways with a customer over the loss leader. Let me give you a real T-Mobile example. My wife and I have been using T-Mobile for our cell phone service for the past five years. It's been pretty good with fairly good service when I travel. A few weeks ago my wife broke her phone and needed a new one. I stopped in and picked one up on a Monday morning. It had a built in mp3 player and a few other bells and whistles she never touched. On Thursday of the same week it quit working. The battery cover wouldn't fit right and it kept shutting itself off. I got all of the wires and parts together and returned it to trade it for another. I spoke to a little phone-nerd named Pat. He said, "I'm sorry this phone got wet and we won't be able to help you with a new phone. You'll have to buy a new one." I smiled and kindly let him know the phone did not get wet and I would like to have a different one. Pat handed me a brochure from a local company that fixes phones that have been water damaged. I showed him the phone, how it doesn't close properly and asked again for another phone. Any phone, I need to talk to my wife, a lot. We have five kids and one of them is in need all of the time. Again, he said no and I'd have to buy a brand new phone and since I just got a new one, I couldn't get a discounted one. I smiled at him one more time and said, "If I walk out the door, I will be looking for the T-Mobile off-ramp and I will find it. Are you sure you want to lose thousands of my annual dollars over a fifty dollar phone?" Pat said he was sorry he couldn't help me and told me to go get my phone fixed. I got Sherri a new phone and am shopping for a new company to give thousands of dollars to.
If you get sideways with me over an oil change, you'll never get my brake and engine work.
If you get sideways with me over x-rays, you'll never do my root canal and crown.
If you get sideways with me over a bottle of $.99 Diet Dr. Pepper, I won't be buying your produce, dairy and meat.
Am I making you some cents?
