Who will forget the India Vs England Test Match at Mohali in 2016. When Virat Kohli (62 & India were 204 for 6) was removed by Ben Strokes, India was in a deep hole. Nothing at that point seems to be right. Fortunately Indian bowlers had done well in the first innings and removed England for 283. Then something unexpected happened: someone lesser known for his batting (Ashwani) played a fantastic & brilliant innings of 72 along with Jadaja and Jayant Yadav. Strategy of Indian Captain worked by playing Ashwani in the game and helping India win the game. Though man of the match was not Ashwin it was Jadeja but the effort was tremendous.
Same thing happens in business also, at times in pricing strategy one product is made a “Loss Leader” but it serves as a deceptive pricing strategy, like Ashwani was a spinner but stumped England with his batting. This helps in generating customer traffic and increases the sales of particular category. The “Product “makes loss or negligible profit on standalone basis but it creates a basis for the organization to make profit. This is not “Bundle Pricing” that we talked about in previous blog but called “Loss Leader Pricing Strategy”
Some Organizations use this strategy very effectively. One such organization is Gillette; all of us know it’s a very premium brand and most of the time we know that it does not indulge into price wars. The fact is Gillette has smartly devised its pricing strategy in such a way that a pull is created around it’s loss Leader Products and customers buy the same. Later on the company gets recurring sales of profitable products.
Gillette makes their Razors as Loss Leaders and creates strong advertising campaigns around them. Customers buy their world class razors at very low prices but along with them they have to buy Blades at very high prices. They can’t even substitute the blades with some other brands as they are not compatible with Gillette Razors.
Smart, isn’t it!! This strategy can work beautifully for organizations or channel partners, who have a product that’s complimentary to some other product.
Though there are some flip slides also to this strategy but we can discuss them in some other section…
