What is a major characteristic of leader pricing?

Leader pricing is a strategic pricing approach that aims to attract customers by offering products at prices below the usual markup or even below cost. The idea behind this tactic is to draw consumers into a store or to a brand with these competitively low prices, often for commonly purchased items—think of it as a loss leader strategy. The expectation is that while shoppers come in for these discounted items, they may also purchase other products at regular prices, thereby increasing overall sales and profitability.

This pricing method leverages the psychological inclination of consumers to hunt for bargains and perceive value, fostering brand loyalty and frequent patronage. By selling particular products at lower prices, businesses can effectively position themselves in a competitive marketplace, stimulating customer interest and foot traffic.

Promotional strategies that focus solely on luxury items or high-end customer segments would not fit with the principles of leader pricing, as they generally target a different consumer base and rely on exclusivity rather than volume sales through discounted pricing.