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It’s okay if you haven’t heard the term “loss leaders” before. Whether you know what they are or not, chances are you’ve seen them and fallen for them a time or two already. With these tips and tricks you can avoid loss leader pricing traps.
In fact, I’ll even share an extreme couponer secret tip for using these pricing tactics to your financial advantage! After this article, you’ll be able to knowingly spot them every time you look at a store ad or walk into the grocery store.
What are loss leaders?
Loss leaders are products sold below cost to consumers like you. They are the mega-deals you see advertised everywhere that draw you into the store.
Grocery stores (and other businesses) usually sell items above cost, so that they can turn a profit. You may find that the price of your favorite product is generally cheaper at one store than another.
This is because the stores or corporations often set the prices at a marked up amount. Different stores, different markup amounts.
The markups of course include all sorts of different variables including supply and demand among other things, but that’s a different topic entirely.
Loss leaders are items the cause the store to lose money, on purpose!
If the store pays $1.50 for a box of cereal, normally sells it for $3, but is offering a deal on it this week where it’s only $0.99each, that’s a prime example of this pricing strategy.
What are some other loss leader examples?
Believe it or not, milk is usually one of the more common loss leaders because most grocery stores carry it in the far back of the store where it’s inconveniently out of the way.
In order to get to a gallon of milk, you have to pass by aisles and displays full of products, sales, and flashy signs advertising the awesome deals.
Other examples include a computer that’s really cheap but needs expensive ink in order to run.
Or something sold at a discount but needs to be bought with something else in order to actually work properly. The latter item may not be on sale, or may even be marked up in price by just a tad. An example is something needing batteries.
Why do stores do this?
Stores offer a loss leader strategy because they know it will get you in the store, and that’s half the battle. When you compare store ads you see similar items in each, and close-to-the-same pricing. But there’s always an item or two that truly stand out and has you drawn to the store to claim that discount.
Chances are, those could be loss leaders. When was the last time you walked into a store for an affordable item and left with ONLY that item? It’s hard to resist impulse purchases!
If a store sells you an item at a loss, but convinces you to buy other items that are marked up in price, it’s not a financial loss to the store.
Are loss leaders legal?
Yes and no. In more recent years states have been passing laws where loss leaders are prohibited, but in the ones where it is allowed, they’re doing pretty well.
There’s a considerable level of success for these sales tactics thanks to the busy shopper that doesn’t have time to focus on grocery budgets or meal planning.
Fun fact, a military commissary is not allowed to sell loss leaders or mark up the prices. This is because they must sell items at cost. The prices they offer constantly fluctuate due to the costs they pay their suppliers.
Military exchanges like a PX are owned by an entirely different company and thereby allowed to offer these deals and marked up prices.
The more you know, right?
Loss leader pricing advantages and disadvantages
Okay so now that you know about the marketing and advertising strategies and how they work, let’s talk about how you can get the most out them and avoid this little trap.
A secret couponer tip is to actually fall for them, without falling too hard. You can indulge without overspending. You can have the savings, without the falling into the trap, and here’s how.
How to avoid the pricing trap
Compare your store ads and determine which store is cheaper.
Make a list of the items you want to get from each store and what their prices are. If Safeway offers ham for $0.39lb but the other stores have it for $0.99, then go to Safeway and get your ham!
If another store has something else ou want for a cheaper price than the other local stores, go there and get it too.
Shopping at multiple stores may not always sound like the best idea, but it could be the best idea if you’re grocery shopping on a budget.
In fact, it’s probably one of my biggest tips for shopping on a tight budget.
It’s something I’ve done for the past 6 years with my kids in tow. I know which stores have the best priced produce, which have the best meat options, and which ones carry affordable dry goods.
I shop at each one in turn, and although it takes a little more time and gas, it still works out to money saved.
For hitting up multiple stores, I recommend planning them in a loop from your house, out, and back. This is pretty gas efficient that way.
Obviously you should take weather and products in mind when shopping. You shouldn’t go to store A for ice cream in 100 degree weather if you plan on shopping at 2 other stores. And if you do, make sure there is a cooler of ice in the vehicle to keep it food safety temps.
I hope this information has been helpful and that you can now make smarter and more informed purchase decisions that can help to stretch your dollar.
What are some loss leader examples that come to mind for you?
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