Why Sell at a Loss

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  1. You sell everything at a fixed margin.
  2. Zero customers come to you.
  3. You suck.

How do you bring in customers?

  1. Busy gas stations do it by selling gas at a loss, so customers could buy stuff at their convenience stores.
  2. Busy supermarkets do it by selling milk at a loss, so customer could buy their more profitable items.
  3. Busy dental practices do it by offering free teeth whitening, so they could generate additional opps. and a recurring customer.

The strategy:

  1. Sell an enticing item at a ridiculously low price (either where you're selling at a loss or no gross margin).
  2. Bring in customers to sell more profitable items.

How Fry's Promotes its Stores

Frequent Fry's Electronics promotions:

  1. Hot dogs and Coke.
  2. $0.25.
  3. Unlimited.

Result:

  • Freakish customers.
  • Freakish exposure to their profitable electronics.
  • Freakish sales.

$^@%$^@%^@?

The gist to marketing:

  • The more exposure you have to your target market (i.e., those likeliest to buy). the more you will sell.

The more your target market is in front of your business, the likelier they'll buy your profitable items.

How should we do it?

Creativity thrives here. Examples:

  1. Sell at a loss, to upsell more profitable items.
  2. Sell at a loss, to generate a recurring customer.
  3. Offer a "basic" version at a loss, to sell a more premium version.
  4. _____get fancy.

How Do I Know if It'll Work?

Test.

Two experiments (i.e., A/B Testing):

  • One with the loss-leader promotion.
  • One without the promotion.

Do it simultaneously (if at all possible) -- so you results aren't skewed to some freakish market condition.

Then, see which gives you a bigger return.

Proceed accordingly.

KABAM.

Sell. Loss. See.

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Posted on December 29

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