Loss leader strategy lesson from 1904 — Applicable in Marketing, Advertising and Sales
For the first time, I heard this strategy in 2014. When I first heard when my colleagues were saying I thought it's just as a fake attempt to manipulate the sales. But slowly after going through different experiments and observing what’s happening in the current industry trends, it is okay to follow that approach to a limited extent.
Let’s go back in see and what happened on one of the experiments in 1904 with a Liquid Ozone Company
This company bought this product for $100,000 having an interest in this germicide business. This is the highest price ever paid for the rights in one country on any scientific discovery. He started to advertise and market this business by approaching different advertisers. It didn’t work out, the company was heavily in debt and it’s balance sheet showed a net worth of some $45,000 less than nothing. On the last day of his fourth year with all losses, he took it as a final chance to contact every advertiser and trying to work with one who could do the Masterpiece that can help this business. He found a person(A) who is named for it.
PersonA was in a good position and do not want to migrate to Chicago for this project. He was offered no salary but with a one-fourth interest in this almost bran After a lot of convincing, PersonA agreed and started working on this project.
After a lot of research and thoughts through his previous experience. He held to his old conceptions
“Serve better than others, offer more than others and you are pretty sure to win”
“I have the winning idea. Let us buy the first .50 cent bottle. Then, to all who accept this, let us offer a guarantee on six dollar bottle battles. We pay for the first bottle (because it's free for users). If that test leads one to continue, we take the risk on the rest”
#GrowthHack1 (Full Loss Leader on first order)
With addition to this, the PersonA suggested
- To each who inquired a free bottle with additional offering “Five dollar bottle instead of six dollars (Meaning $1 dollar discount)”
- “If the results of this five bottles proved unsatisfactory, every penny would be returned to users”
#Growthhack2 (Minimal Loss on second order)
In a nutshell, one bottle for…