How Gillette raised market share with Loss leader pricing strategy?

loss leader pricing strategy
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Many of the bold market players got carried away from the flow of the competitive business world. And even many of the old business firms have bet their entire stake and strength to preserve their once-rising business empire from the rival's claws. But nothing can help them out. 


The competition in this business world is making it really tough for businessmen to survive. Many of them are jumping in with robust strategies by infusing their time and efforts but does not guarantee a sure-shot success. And when talking about one of the price strategies that work great for beating the high competition, is the Loss leader pricing strategy.


Today, we will assess this impactful strategy by learning about How Gillette raised its market share with the Loss leader pricing strategy and served better than competitors. 


Loss leader pricing strategy


Loss leader pricing strategy is a process of selling the goods or services at a loss for attracting customers. And sometimes the sellers may sell the products at a relatively low price by neither making a loss nor profit. 
You might be perceiving that if the sellers are making no profit or selling at a loss then how they are earning and covering their cost? 



But, you should be aware that this strategy is not applied to your entire product portfolio but only to a few of them. Example: You own an apparel store and surrounded by various stores that display similar stocks, but to make the customers buy your offerings, you pick out some of your items and tag them at a loss price. 


By doing this you are making the customers believe that the price of your entire product offering is quite reasonable. And eventually, you are building more customer base without harming your overall profitability. 


And because of the Loss leader pricing strategy, you are not only attracting more customers but transforming them into loyal buyers. That gives you an edge over others by raising sales volume, market share, and defending lofty competitions. Also, Loss leader pricing helps you in the clearance of your old stock that was just raising your storage expense and was hard to liquidate.



How Gillette raised market share with Loss leader pricing strategy?


Gillette is a US-based brand that is a subunit of P&G and is quite popular for its wide range of men grooming products. Especially, men razors which is one of the most selling products under the product portfolio of Gillette. Its popularity and massive market share are not because of its wide range of offerings but because it believes in adopting the right gameplans for creating an admired image.



Gillette captured a sizable market share by introducing the mechanical razors and blades at a relatively cheaper rate as compared to the other market players who were looking for covering their costs by making good margins. By giving a low price offer at an introductory stage it opened the doors for its other men grooming products such as shaving gels, creams, aftershave lotions, and other skincare products. 



Gillette using a Loss leader pricing strategy and used its wide range of adjustable blades as its key weapon that is sold at an attractively low price for grabbing the customer's attention. While it is proficient to cover its margins by selling the other men grooming products at a regular price.


Example: We can shop Gillette's regular razor at Rs. 20-25 and its blades or cartridges are priced at just Rs. 4-9/peice (depending on the razor type), which is quite low. While these regular blades and razors are pushing the sales growth, on the other hand, it is maintaining the overall profitability by serving with other grooming products at a good margin.

Now, it has reached a stage where it is quite hard for any new entrant or competitor to fight for the position that Gillette has maintained in the mind of its targeted audiences.

Advantages and disadvantages of  Loss leader pricing


After going through the above reading you must be well aware of How Gillette raised market share with Loss leader pricing strategy? But, one must be conscious of both the positive and the negative aspects of a strategy. Let us spotlight the advantages and disadvantages of  Loss leader pricing for better clarity:


Advantages 

  • It is a very competent way for boosting sales and defending a highly competitive business environment. Since sellers will be able to elevate their turnover if some of the products are served at a better price as compared to any other corresponding businesses dealing in similar products.

  • It helps in the stock clearance of the goods that are no longer catching the customer's attention. But, if those products are now available at a cheaper rate, it pushes the customers to buy them.

  • Loss leader pricing helps in generating a more customer base. Since selling the products at a better price provoke them to shop from you. Also, it may lead to a probability that those customers would be loyal to your business and love to shop from your place.

Disadvantages 

  • One of the main disadvantages of this strategy is that customers may take benefit by purchasing only the products that are low in price. If buying only those products that are marked low will induce book losses to the business.

  • We might have heard that customers are price sensitive but on the other hand, customers are also quality sensitive. If you are applying a Loss leader pricing technique then there might be a chance that customers may perceive that you are selling a low-quality product.



Take away

From this article, we got an understanding of the Loss leader pricing strategy and how it is helpful at elevating the market share, sales, and driving more customer engagement better than the competitors. Also, we got more clarity into the strategy by knowing How Gillette raised market share with Loss leader pricing strategy?

At last, we concluded by showcasing the advantages and disadvantages of  Loss leader pricing.