Leader Pricing

Reduction in the price of a high-demand item to get people to come into a retail store or to encourage a direct mail purchase that may inspire additional purchases; also called loss leader pricing. It is believed that once a decision to purchase an item is made, the customer's resistance to purchasing additional items at full price will be lower. Leader pricing can be at or below the seller's own cost. The loss leader is usually a moderately priced item that most people can afford and that has a well-known normal selling price. Supermarkets usually use a staple item such as soap or coffee as a loss leader. Leader pricing may involve a single product or a complete product line. See also clearance; markdown.

Reduction in the price of a high-demand item to get people to come into a retail store or to encourage a direct-mail purchase that may inspire additional purchases; also called Loss Leader pricing. It is believed that once a decision to purchase an item is made, the customer's resistance to purchasing additional items at full price will be lower.