![]() ![]() They kept the prices of Kindle low and made money by selling ebooks. Amazon KindleĪmazon is yet another company that used this pricing strategy with its Kindle. The company has been using this strategy for a long time and has become a leading brand in the razor industry. This strategy allowed Gillette to sell its other products such as after-shave, deodorant, etc. The company knows that the customers will have to buy replacement blades and here they make most of the profits. It sells its mechanical razor at a low price to attract new customers. Gillette is one of the most famous examples of a company that uses loss leader strategies. In this way, the company uses consoles as loss leaders to promote the sale of profitable video games. The console-making companies know that once the console is sold, the customer will buy games for it, where they make most profits. But in reality, these are usually sold as loss leaders. Video game consoles like Xbox and PlayStation may seem expensive. Here are a few great examples of loss leader pricing. Legal Implications: In many US states, the use of the loss leader strategy is against the law as it is considered predatory.This will harm the brand image, and the strategy will not work. Negative Quality Perception: If the product’s price is too low, the customer might presume the product to be of poor quality.They don’t purchase any additional products, thereby defeating the whole purpose of implementing loss leader pricing strategies. Cherry-Picking: Cherry-pickers are those customers who solely purchase loss leaders.In that case, the number of customers and profit margins will not increase. Risk of Loss: There is a pretty good chance that the strategy won’t work.The major shortcomings of this pricing strategy are: Increase in Sales: Loss leader is a clever strategy in which the product, sold at a loss, is just a means to increase the traffic of customers and make them purchase additional products, thereby, increasing the overall sales and compensating for the loss made on the cheaper products.Builds a Customer Base: By selling products at a low price, a business attracts more customers and expand its customer base.In this case, loss leader strategies are used to make people buy and try out new products. Enter New Markets Easily: In the initial days of operating a business, it is difficult to get new customers as they are always sceptical when trying out new products.The main advantages of loss leader pricing are: ![]()
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