Small business need-to-know descriptions and accounting compliance — the first question: is it legal in your state?.
Excerpt: A loss leader is a method of pricing an item at lower than the current market price or even below the cost of manufacturing or acquiring the item. The primary objective is to attract and maintain customer-patronage in order to boost the sales volume of the entire line of products carried by the business establishment. Some regard this pricing move as a marketing strategy, while some others call it a sales promotion. In about twenty-two U.S. states, this pricing method is illegal. In light of these different views, business owners and managers should first establish certain cost accounting concerns that directly affect the liquidity of a business entity: • Determine if it is legal in the U.S. state where the business operates. • Consider this strategy if the item or service has other convincing or drawing qualities aside from its below-cost price; ….
Read full article via Using Loss Leaders as Pricing Strategy: What Business Owners Should Know. From BrightHub