Loss Leader Strategy

Dictionary Says

Definition of 'Loss Leader Strategy'


A business strategy in which a business offers a product or service at a price that is not profitable for the sake of offering another product/service at a greater profit or to attract new customers. This is a common practice when a business first enters a market; a loss leader introduces new customers to a service or product in the hope of building a customer base and securing future recurring revenue.

Investopedia Says

Investopedia explains 'Loss Leader Strategy'


The loss leader strategy is more than just a nifty business trick - it is a successful strategy if executed properly.

A classic example is that of razor blades. Companies like Gillette essentially give their razor units away for free, knowing that customers will have to buy their replacement blades, which is where the company makes all of its profit.

Another example is Microsoft's Xbox video game system, which was sold at a loss of more than $100 per unit to create more potential to profit from the sale of higher-margin video games.

comments powered by Disqus
Hot Definitions
  1. Private Equity

    Equity capital that is not quoted on a public exchange. Private equity consists of investors and funds that make investments directly into private companies or conduct buyouts of public companies that result in a delisting of public equity.
  2. Valuation

    The process of determining the current worth of an asset or company. There are many techniques that can be used to determine value, some are subjective and others are objective.
  3. Valuation

    The process of determining the current worth of an asset or company. There are many techniques that can be used to determine value, some are subjective and others are objective.
  4. Tech Street

    A term used in the financial markets and the press to refer to the technology sector. Companies like Intel, Microsoft, Apple and Dell are all considered to be part of Tech Street.
  5. Tech Street

    A term used in the financial markets and the press to refer to the technology sector. Companies like Intel, Microsoft, Apple and Dell are all considered to be part of Tech Street.
  6. Momentum Investing

    An investment strategy that aims to capitalize on the continuance of existing trends in the market. The momentum investor believes that large increases in the price of a security will be followed by additional gains and vice versa for declining values.
Trading Center