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How you can use loss leader pricing to boost the average order value for your store

Have you ever thought about pricing some of your products lower than market value?

Wait… wait… what?

It sounds crazy, we know. But store owners often price their products low so they can attract customers and upsell products which pay off the low-priced product.

Shopify recently published an article that contains notable examples of loss leaders.

This is called loss leader pricing.

And it’s a strategy you can use to boost your store’s average order value (AOV), compensate for the loss, and acquire customers who stick around.

Shopify recently published an article that contains notable examples of loss leaders:

  • Holiday deals. Think Black Friday, Christmas, and similar event discounts that store owners use to attract you to their store instead of their competitors’.
  • Electronics. Gaming consoles are loss leaders. Equipment and games are the upsell.
  • New brands use loss leaders to establish their presence in a crowded market.

Shopify also provides tips on how you can use loss leaders to grow your own brand or business:

Use excess inventory. If there’s low demand for a particular product, you can use that product as a loss leader.

You can empty your stock and use that product to cross-sell and upsell other items—or acquire customer data you can later use for retention.

Sell consumables and replacement parts. Gillette is fine with selling razor handles at a low cost because they know they can get you to buy replacement parts at a higher profit margin.

If you know customers will come for necessary consumables, sell your main product parts for cheap.

Use product page recommendations. E-commerce stores use this tactic often.

Sell one product for a lower price, but then use recommendation and upsell apps to suggest complementary products to boost AOV.

Analyze your business. Sometimes you can sacrifice a bit of cash to get a lot of data. Loss leaders will boost customer activity in your store and give you more insight on their behavior.

You can then use this insight to optimize your ads and website for more conversions.

Intrigued? Now may be a good time to experiment with lower prices so you can start making a bigger profit… as strange as that sounds.

Alex Lim is a certified book reviewer and editor with over 10 years of experience in the publishing industry. He has reviewed hundreds of books for reputable magazines and websites, such as The New York Times, The Guardian, and Goodreads. Alex has a master’s degree in comparative literature from Harvard University and a PhD in literary criticism from Oxford University. He is also the author of several acclaimed books on literary theory and analysis, such as The Art of Reading and How to Write a Book Review. Alex lives in London, England with his wife and two children. You can contact him at [email protected] or follow him on Website | Twitter | Facebook

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