Sales

Lead with a loss

by Cinda Baxter on November 9, 2008

in Economy, Pricing, Retail, Sales

Maxine Clark, founder of Build-A-Bear, announced a new program to address tightening budgets-—beginning today, the pre-adorned bears will drop in price to only $10.00 each. Whether that means all of them (including the $25 pink one) or just the basic brown version, I don’t know. The announcement is recent enough that the B-a-B website has yet to be updated.

In tradition retail terms, the $10 bear is called a “loss leader.” You offer one item at a discount-—usually a deep discount, nearing cost-—to bring in shoppers who are likely to continue buying other products at full price. In this case, the inexpensive bear acts as an effective vehicle for the full price add-ons that can quickly push the price of a simple toy into the stratosphere. Some consumers will come in that otherwise might not have…and a fair number (both new and regulars) will use the savings as justification for adding an extra piece or two, which more than likely will price out above the $10 saved up front.

That’s the idea behind loss leaders. Hook the customers, then let ‘em keep spending. It’s inconceivable that Grandma Liz would just buy the naked bear. That’s not what B-a-B offers. The moment granddaughter Madison gets the thumbs up, additional purchases are guaranteed.

Which gave me an idea. What if stationers were to offer deep savings on the price of the reception card in wedding orders? Deep enough to make it reeeeeally tempting, but not so deep you’re exceeding your comfort level. What bride needs just a reception card? To get the deal, they’ll also need to pick up the rest of the invitation suite, at full price.

Bait and switch? No. You aren’t hiding or raising prices on anything. You’re simply putting a sale price on a portion of the order that requires the remainder of the order to be complete. Kind of like a naked bear who needs pom poms.

If you have a young niece or daughter, you know what that means. If you don’t, well…don’t dwell on it.

Monday, 11.10.08 editor’s note: I see that today, Build a Bear is running actual commercials promoting the special. Look for this to be the first of many big box loss leaders coming your way.

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