Definition
A loss leader is a product or service that is intentionally sold at a loss (i.e., below cost) to attract customers, with the goal of generating larger, more profitable downstream purchases.
It’s a strategic hook. You sacrifice margin upfront to acquire users, increase volume, or enter a competitive market, and make up the profit elsewhere.
You lose money on the first transaction, but win on lifetime value.
Where it's used
- Retail & e-commerce: Razors are sold cheaply, but blades have premium pricing
- SaaS & tech: Entry-tier product or usage plan offered at near-zero margin
- D2C brands: Flagship SKU priced low to build trust, upsell bundles later
- Marketplaces: Zero commission or subsidized pricing to seed one side of the market (e.g., drivers, hosts, sellers)
Classic examples
Benefits of using a loss leader
Risks and tradeoffs
Final takeaway
A loss leader is about leading buyers into a profitable journey. When paired with clear monetization pathways, it becomes a powerful growth tool. But if not tracked closely, it can quietly eat away at margins and brand perception.
GPT prompt: Use a loss leader strategy
Act as a growth strategist at a PLG SaaS company. You’re launching a new AI feature that’s expensive to run but unlocks stickiness. Create a loss leader strategy to price and package it, including how to offset the cost through upsells, engagement, and cross-sell potential. Note: Change the prompt conditions based on your needs (first line)
