What is loss leader pricing?
Loss leader pricing is a deliberate pricing strategy in which a product or service is sold at or below cost to attract customers, with the expectation that the loss is recovered through higher-margin add-on sales, subscription upgrades or cross-sell of profitable products.
Loss leader strategies are common in retail (grocery), software (free tier funnelling to paid plans) and marketplaces (subsidised early-stage user acquisition). Pricing law in many jurisdictions (anti-dumping, predatory pricing rules) limits the use of loss leaders against competitors.