Small Business Achievement - Thinking Through Loss Leaders

Have you ever purchased an item at a ridiculously low price and wondered why it was so cheap? This item could have been a loss leader. This is a product or service that you sell in order to entice clients to sample your services, test your products, or visit your store. Loss leaders can be a great tool to help you grow your small business.

Sometimes in business, a small loss in the short term can result in a big long-term win. This is the strategy behind a loss-leader product. There are many different variations that are appropriate depending on your business model.

In the service industry, you might provide a quick and lower cost service to encourage people to continue visiting you. In the short term they will come to take advantage of the best deal there is; a free service. The goal is to create awareness and brand recognition with the client to win their future business.

Now, you are in business, so you cannot give away the store. Your loss leader should be something reasonable. It needs to demonstrate and document the quality and service that you provide the marketplace. Since you will be selling it at a very lower price, or possibly even giving it away, realize that you cannot take a massive loss.

A small loss is fine if there is a reasonable chance that you can win future business. If your loss leader does not result in future business, you either selected the wrong product, or your target market was not well chosen.

Loss leaders can be a very effective strategy to help you grow your small business.

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