Small
Business Marketing and Advertising Strategy
Develop a Sales and Marketing Strategy Using Best Practices for Small Business
Leverage Promotional Product Advertising with a Loss-Leader
What item keeps your customers coming back for more? What would happen if you offered that item at or below cost? Consider Gillette. Gillette sells their razors below cost. They have run numerous promotions giving razors away for free. In fact, I recently received a free Gillette razor in the mail. Gillette makes no money from their razor sales. But they make plenty of money selling the blades. A loss leader is an item that is sold below cost in an effort to stimulate other profitable sales. It’s an excellent way to fully leverage your marketing. What product or service could you offer at a ridiculously low price knowing that when your customers decide to purchase the inexpensive item they will often also purchase other, profit generating items? I am not suggesting that you compete on price. Competing on price is a strategy that should be left to the commodities folks. Reducing your margins across the board to a lower level than your competition will result in you being a former business owner. By using a loss leader the objective is to diminish the barrier to entry for your potential customers. Once those barriers are taken away, people are more willing to purchase from you. They are willing to purchase the loss leader and often willing to purchase your higher margin offerings. Think about dollar menus at fast food restaurants. These restaurants forgo normal profits on these items knowing that people will tend to also purchase food from the regular menu. Movie theaters tend not to make any profit on ticket sales. But they make up for it, and then some, with their food sales. Convenience stores are happy to provide low margin gasoline because lots of gas purchasers also enter the store and buy other items. My favorite example of a loss leader is convenience stores that offer free ATMs. Customers who don’t want their bank accounts pillaged by fee-hungry businesses use these ATMs to withdraw cash. And then they attempt to walk back through the store towards the exit with wallets full of newly obtained crisp bills burning holes in their pockets. Did you ever wonder why these ATMs are never in the front of the store? It is so you have to walk past all of the candy, soda, cookies, and other high margin items for sale. Many people cannot escape the store without making a purchase. Implement promotional product advertising using this pricing strategy and leverage the marketing power of a loss leader. Shawn McGee is a marketing consultant and author of the Leverage Marketing Tools. |
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Shawn McGee Marketing
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