Loss-leader pricing is used to attract customers by pricing some items at or below cost.

• A. Loss-leader pricing
• B. Price discrimination
• C. Price skimming
• D. Premium pricing

Answer: (A)

Loss-leader pricing is about drawing customers in by pricing some items at or near cost to lure them into the store. The idea is to generate traffic and boost sales of other, higher-margin items, making up for the loss on the leader item. This is different from price discrimination, which charges different prices to different customers for the same product; price skimming, which starts with a high price and lowers it over time to capture different willingness to pay; and premium pricing, which keeps high prices to signal superior quality. The key effect of loss leaders is to increase overall store traffic and cross-sales, not to maximize profit on the leader item itself.