Legal Definitions - loss leader

A loss leader is a product or service offered for sale at a significantly reduced price, often below the seller's actual cost. The primary purpose of a loss leader is not to make a profit on that specific item, but rather to attract customers into a store or onto a website, with the expectation that they will then purchase other, more profitable goods or services.

• Grocery Store Promotion
  A large supermarket advertises a popular brand of coffee at an exceptionally low price, which is actually less than what the store paid for it. Customers flock to the store specifically to buy the discounted coffee. While they are there, they also fill their shopping carts with their weekly groceries, including fresh produce, meat, and dairy products, all of which are sold at regular, profitable prices. The coffee, in this scenario, is the loss leader, drawing customers in to make other, more profitable purchases.

• Electronics Retailer Sale
  An electronics chain offers a brand-new, highly anticipated smartphone model at a price that is slightly below its wholesale cost for a limited promotional period. Tech enthusiasts and early adopters are drawn to this unbeatable deal. Once in the store or on the retailer's website, many of these customers also purchase accessories like protective cases, screen protectors, wireless earbuds, or extended warranty plans, which carry high profit margins for the retailer. The smartphone serves as the loss leader, enticing customers to buy additional, profitable items.

• Online Software Subscription
  A software company offers a basic version of its popular photo editing application with a one-year subscription for just $5, a price far below its development and maintenance costs. Many aspiring photographers and hobbyists sign up for this incredibly cheap deal. After using the basic version for a few months, a significant percentage of these users decide to upgrade to the premium version, which offers advanced features and cloud storage at a much higher annual fee. The initial low-cost subscription acts as the loss leader, converting users into paying customers for more expensive services.