What does the term 'loss leader' imply?

The term "loss leader" refers to a pricing strategy where a product is sold at a price that is either low or below its market cost to attract customers. The intention behind this approach is to drive traffic to the store or website, hoping that customers will make additional purchases of other items that have higher profit margins. By selling specific items at little to no profit, businesses can incentivize consumers to enter the market, ultimately aiming for an increase in overall sales volume and customer loyalty.

This strategy is particularly effective in competitive markets, where businesses can leverage the "loss leader" to entice customers away from competitors. While the product being sold may not generate profit, it serves as a tool for customer acquisition and increased overall sales.