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LSDefine
Simple English definitions for legal terms
loss leader
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A quick definition of loss leader:
A loss leader is a product that is sold at a very low price, sometimes even below the cost, to attract customers to a store. The idea is that once the customer is in the store, they will be enticed to buy other items at regular prices. This is sometimes called a "leader." However, it is important to be aware of bait and switch tactics, where a store advertises a low-priced product to lure customers in, only to try to sell them a higher-priced product instead.
A more thorough explanation:
A loss leader is a product that is sold at a very low price, often below the cost of production, to attract customers to buy other items. This is a common marketing strategy used by businesses to increase sales and customer traffic.
A grocery store may sell a gallon of milk for $1, which is below the cost of production, to attract customers to come into the store. Once the customer is in the store, they may purchase other items at regular prices, which will make up for the loss on the milk.
Bait and switch is a sales practice where a merchant advertises a low-priced product to lure customers into the store, only to induce them to buy a higher-priced product. This is illegal in most states when the original product is not actually available as advertised.
A car dealership may advertise a car at a very low price to attract customers to come into the dealership. Once the customer is there, the dealership may tell them that the car is no longer available, but they have a similar car at a higher price. This is an example of bait and switch.
Overall, loss leader and bait and switch are both marketing strategies used by businesses to increase sales and customer traffic. However, while loss leader is legal and ethical, bait and switch is illegal and unethical.