Thursday, December 22, 2011

Can small businesses create loss leaders?

You may or may not have heard about loss leaders. This is when a big store discounts some stuff below their purchasing cost in order to entice customers to come and buy more regularly priced or expensive products on which the store make money. All the big box retailers do that since their volume and purchasing power allow them to make money on regularly priced stuff and take a loss on the slow moving stuff and thus make profit in the process. The question is can the small businesses like the mom and pop stores create loss leaders in order for people to buy their regularly priced item. On the face of it, it seems that is not possible since the very small businesses are already struggling to get by and they don’t have big purchasing power or marketing budget to advertise their wares.

But if you are creative enough, one can have numerous items bought brand new at low prices discount then discount and try to get word of mouth or advertise cheaply or for free on the web. Another way is to have a drawing (without breaking your budget of course) to create a buzz about your store and then see the people coming in. I would right now not go for the group coupon thingy although it creates buzz but if you are unable to handle to rush you can be burnt (not to mention lose big). The internet has created many business models (and destroyed some too) but overall if you are able to have some small stuff as a giveaway or as a discount, you can create a lot of buzz even with one customer (as I said before word of mouth can be a huge marketing tool if played right) and also don’t forget the social media where you can hit pay dirt if you are smart and creative enough.

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