Service of Loss Leaders

February 1st, 2010

Categories: Cost Cuts, Loss Leaders, Marketing, Restaurant, Retail, Visibility

A loss leader draws customers. Retailers, restauranteurs–anyone, actually–expect to sell the item at a loss [or maybe not at all].

I got the idea for this post from the cover of the ThursdayStyles section of The New York Times on January 28. The construction of the bodice and bow at the waist of the featured gown by John Galliano for Dior did not allow the wearer to do anything but stand all night: Sitting either for dinner or scatological reasons would be impossible because the elements would attack–dig or slap–nor could you ballroom dance or be hugged while wearing it. The bow is too huge and stiff. So why bother design such a gown? The Galliano and Dior names–and the dress–were featured prominently in coverage of this year’s Paris haute couture shows so it served its purpose.

I was for a brief period in the food business. There I learned that desserts are loss leaders for restaurants because the ingredients are expensive and they are labor-intensive, therefore unprofitable, yet expected and fun to admire. Think of size 0 models and the self-consciously healthy who inhabit four star restaurants: They would never order the amazing pastries or sugary concoctions on display on silver trays or rolling carts. The lower end of restaurant chains feature desserts, even though dinner portions can be gargantuan. Much of the time even dessert-lovers hardly have room for coffee much less a sweet treat.

Retailers draw me inside with a window manikin dressed in a glorious pattern on a blouse which I know in advance won’t suit me. And I’m tempted by a fantastic pleated skirt on display although the ensuing dry cleaning bill would land me in bankruptcy. But while I’m inside the store, I buy a plain white blouse and simple pair of slacks–mission accomplished for the store!

One of my clients sold value-priced curtains and drapes. Nearly all their sales were of unimaginative weave and fabrication and in beige. Every market they would introduce wonderful, creative additions to the line that editors adored but most buyers were afraid to carry. Smart ones did because like the brightly patterned blouse, they’d attract customers who would usually buy something from the department.

Can you think of loss leaders you appreciate or have deliberately introduced to attract attention and sales?

Have businesses dropped visual treats and goodies to save money, while especially in this economy, they are necessary to attract customer interest and sales?

 

3 Responses to “Service of Loss Leaders”

  1. Nancy Farrell Said:

    I was sorry when I read that Lord & Taylor stopped serving coffee to its customers at 9:30 in the morning at the Fifth Avenue store. It was a nice tradition and one that I shared with my mother when I was young and with visiting guests as I got older. The coffee was poured from a beautiful carafe into “real” coffee cups by an employee in a crisp uniform and you just felt as though you were part of something special. It was nice, too, to have a seat and relax before the store officially opened. For me, the coffee service got me to go to the store in the first place and, once there, I usually bought something.

  2. Simon Carr Said:

    Some of you may have seen the recently released film, “Up in the Air.” It brings to mind a whopper of a loss leader, perhaps the biggest of all time, airline “miles!”

    Back in the 1970s, American Airlines came up the ingenious loss leader of awarding frequent flier “miles” to ensure customer loyalty. The more miles you flew, the more “miles” you accumulated, which you could spend on “awards” of free airline tickets and upgrades. I remember because I was one of the first to sign up for their program. At that time I was traveling on business much of the year, and it seemed like a good deal especially since my employer had decided not to recapture the miles I was accumulating.

    Pretty soon all the airlines had similar programs, as did hotel chains, credit card issuers and all sorts of other retailers. In no time I found that I had 10 to 20 mileage cards in my wallet and a mountain of paper to sort through each month with all the statements and promotions being sent to me. Airline “miles” suddenly had become a big business. While manipulating the miles to get the best deal from an airline was time consuming, as was the booking of tickets, I also did get to fly for free, or in upgraded seats, quite a lot. (I even once flew New York to Washington and back to top off my “miles” so that I would be able to fly free to Europe and back a couple of weeks later!)

    Think about it though. These “mileage” programs, loss leaders that they may be, are a completely unproductive waste of time and money. As every airline is doing the same thing, there is no special benefit to any specific airline as a consequence of their awarding “miles.” If these programs didn’t exist, their sponsors would collectively be able to save tens of millions of dollars, if not hundreds of millions or even more, in expensive computers, office space, mailing costs and the thousands of people they have to employ to run their programs. Consumers wouldn’t have to waste hours keeping track of their “miles,” and might just find that the cost of flying was coming down. If not, then at least the airlines, with the cost savings from not having the programs, would be operating more profitably and would not mostly be in, or near, or just out of bankruptcy as they now are.

  3. Jeanne Byington Said:

    Nancy,

    What a lovely tradition. Not the slightest bit elegant as your example, I remember a dry cleaner who’d give me a piece of bubble gum when I went in with my mother and I would plead for an excuse to go there or the bakery that sometimes would give me a cookie, depending on who was serving us.

    Simon, Once everyone has the same good idea it becomes expected and while it may cause a loss, and it may direct people to one or another airline in order for them to collect a significant number of miles, I agree that most people would probably prefer an inexpensive, safe, on-time flight without the mile trimmings.

    The airline loss leader might be a smart meal–great cheese, lovely olives, real tasty bread, incredible salami and similar foods that travel well and are given to frequent flyers, are paid for or offered as an upgrade.

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