What is a loss leader?

What is a loss leader?

• A. Product sold below cost to draw in customers
• B. Promotional pricing
• C. Discounts and sales
• D. Psychological pricing

Answer: (A)

A loss leader is a product sold at below cost to attract customers into the shop. The aim isn’t to profit on that item itself but to bring people in so they buy other products, often with higher margins, to cover the loss and generate overall profit. Retailers use this tactic to increase footfall and boost sales of more profitable items. The other options describe broader pricing ideas: promotional pricing is temporary price cuts to boost demand, discounts and sales are general reductions, and psychological pricing relies on price perception rather than selling below cost.

A loss leader is a product sold at below cost to attract customers into the shop. The aim isn’t to profit on that item itself but to bring people in so they buy other products, often with higher margins, to cover the loss and generate overall profit. Retailers use this tactic to increase footfall and boost sales of more profitable items. The other options describe broader pricing ideas: promotional pricing is temporary price cuts to boost demand, discounts and sales are general reductions, and psychological pricing relies on price perception rather than selling below cost.