COMMENT ON THE 2 DISCUSSIONS BELOW:
Many successful retailers use a loss leader pricing strategy, in which they advertise an item at a price below their cost and sell the item at that price to get customers into their store. They feel that these customers will continue to shop with their store and that they will make a profit in the long run. Do you consider this an unethical practice? Who benefits and who is hurt by such practices? Do you think the practices should be made illegal, as some states have done? How is this different from bait-and-switch pricing?
In my opinion, Loss leader pricing cannot be considered an unethical practice as the item is sold at the price it is advertised. Regarded as one of the marketing strategies to attract new customers and boost sales, it does cause a threat to other competitors as it may end up in monopoly of the shop, which uses the strategy.
Using the practice of loss leader pricing would benefit if it carefully considers the new customer turnout, the probability of selling other products in the shop, etc.
In the case of dissatisfied customers (who do not get the product at the discounted price due to stock runout) or smart buyers who choose cheaper alternatives for products other than discounted ones, the shop would be hurt by such practice. Another stakeholder who will get hurt by loss leader pricing would be the competitors who cannot sell items cheaper and hence hit by the lower prices offered by loss leader pricing.
Bait and switch pricing is one where the shop advertises the price of an item to be lower than its original cost, making the item as a bait for the customer to visit the shop and make the customer buy a high priced alternative citing that the bait item has run out of stock or is no longer available. Bait and switch is an unethical practice. It does not offer the customer the item at the same price as advertised compared to loss leader pricing, which allows the customer to get the item at the advertised price. In the case of loss-leader pricing, the customer chooses to decide if he wants other marketed products. In the case of bait and watch, a needy customer would be forced to purchase the product he needs at a higher price.
I would like to say that loss leader is a marketing strategy that requires to pick one or more retail items to be sold below cost at a loss to the retailer in order to bring customers. The loss leaders are the products on sale at low prices as an attraction to customers to step in the store. Loss leader pricing cannot be consider an unethical practice, retailers use this strategy to attract customers . For instance, in this period while the business is down, retailers are using loss leader pricing to draw customers in their store by giving them good deals. They are placing hot items such as, masks, gloves, face-shield, sanitizers in the front, sold at discounted price. So as to draw customers in the store, where they will find and may buy plenty of regular priced products. Also retailers give good deals to customers on Black Friday by promoting items at a fraction of the regular price like a reason for customers to buy there in lieu of at the next store. It could be unethical when they advertise a low priced product to draw customers in the store, once inside that article is hide defective or low quality and then propose of high price. The store would benefit from these practices because they bring new customers and add more revenue to the business. Sometimes customers are hurt financially because they come in the store for a single item and low priced product at the end they care many shopping bags that they were not intended to purchase. These practices are not illegal because they are just a business strategy and many businesses use these practices. Is different from bait-and -switch because the advertise on one price and at check out is a different price or the item is not available. It is misleading the customers.
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