Loss Leader. It’s catchy enough to sound like a superhero name, isn’t it?

It’s also ironic. After all, how can a respected word like “leader” be associated with something as negative-sounding like “loss”?

Before you start to overthink and stress yourself out, listen to this, my young grasshopper. “Loss Leader” simply means a popular product is sold at a discount to attract customers and encourage more sales in the process.

Confused? Just think of companies selling low-cost computer printers that need expensive ink or brands selling cheap razors with replacement blades selling for a heftier price.

Amazon also takes advantage of it by selling the Amazon Kindle at a discounted, too-good-to-be-true price. After all, they know that by buying a Kindle, you’d also need to buy accessories and ebooks exclusively available within their brand.

Ecommerce brands strategically use loss leaders because even though they may be selling at a loss, they’re aiming to make up for it by increasing the customer’s Average Order Value. As a result, they cover the loss and still produce profit.

Both you and your customer win. Your customers get a great deal and you can use this strategy to grow Customer Lifetime Value. Here’s how you can get started: