Loss Leaders

When I was 14, working for my parents in their drug store, one of my jobs was to cut the headlines off of yesterday's newspapers and put them into an envelope, throwing the rest of the paper away.

We'd sell 10-15 per day on average, but we always got 20-25 and though the job wasn't difficult, it was repetitive and ever-present. I couldn't understand why we wouldn't eliminate an opening-chore that was only worth about $1.

That's when I learned the concept of a loss leader: something that brings customers into the store, sometimes at a loss, to either sell other items, introduce customers to the store, or create habits (which leads to selling other items).

Now I see that tactic everywhere. Jeffrey the Marketer calls it crack marketing, but McDonald's runs 39 cent cheeseburger specials (probably a break-even), Kroger sells milk and bread at really low prices, Chick-fil-A sometimes offers free drinks or dessert, cellular providers give the phone away, creedit card companies offer 0% financing...

Sometimes it's easy to determine your "loss" offer, sometimes it's not so easy (a coffeehouse, for example, is a harder sale because the leader isn't necessary to the customer). Either way, getting butts in seats, by hook or by crook, is the first step to having frequent customers.