Distinguish between leader pricing and bait pricing. What do they have in common? How can their use affect a marketing mix?

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In a strategy using leader pricing, a retailer will price certain merchandise at very low prices. The leader price might even be just slight above or at cost, which means that the margins on the particular item will be low or even zero. The strategy behind leader pricing is to entice consumers into the store. The retailer hopes that once people are in the store, there will be many other items that are at full price and that attract their attention. If consumers buy other merchandise that carry higher margins, it will offset the reduced margin on the items being priced at leader pricing.

Leader pricing is different from bait pricing. While both offer merchandise at significantly reduced prices, with leader pricing, the retailer is willing to sell the merchandise at the advertised price because it forms a part of the overall product mix and the strategy is to use the loss leader item to sell more high-merchandise units. Bait pricing is similar in that the retailer offers certain items at extremely low prices, often at cost or slightly above, just like with leader pricing. However, the primary difference is that with bait pricing, the retailer hopes to convince the customer to purchase a similar item at a higher price.

An example of bait pricing would be that the retailer offers generic widgets at the very attractive price of $1 per widget. However, when the customer tries to purchase the $1 widgets, there are none left or the salesperson aggressively tries to convince the purchaser to buy a branded widget at $3 instead of the generic one. This is often referred to as bait-and-switch tactics.

Because the marketing plan with leader pricing is aimed at getting more foot traffic into the store, the retailer often includes a few loss leader items in the overall marketing mix. This makes sense because the retailers understands that the loss leader item will generate little to no margin but expects the other merchandise—often marketed as aggressively as the loss leader item—to offset the pressure on consolidated margins.

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Leader pricing is a strategy whereby a retailer sells goods at very low prices. The seller risks his or her profit margins in order to boost sales. Sometimes, the profit can be zero. This pricing strategy is common in some fashion stores. Instead of throwing away the remaining stock, some retailers sell what’s left at a low price because they want to clear the inventory and bring in new clothes.

Bait pricing is used in advertising. The retailer usually uses different media platforms to advertise the low prices offered by his or her store. If the customer takes the bait and goes to the store, they are met with disappointment because the seller will claim that those discounted items have sold out. The retailer then tries to sell the disappointed customer other items at higher prices.

Leader pricing and bait pricing have one thing in common: both methods use low pricing to entice customers to make a purchase.

The marketing mix refers to the different methods and techniques that a company uses to promote its goods and services. For effective marketing, the company has to pay attention to the four Ps: price, promotion, product, and place. The use of leader pricing or bait pricing can affect the marketing mix by determining the price or type of promotion to be undertaken by the firm.

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Leader pricing is the pricing strategy in which a company will set low price points. By doing this, the company cuts into their profit margins and often will end up selling goods at a loss. This strategy is used by companies who are introducing new product lines or entering new industries as a way to combat established players in the market whose brand recognition allows them to sell at a higher price. The hope is that making many unprofitable sales will build brand equity and build a reliable and loyal customer base who will continue to purchase when the price increases and these products become more profitable for the company. This strategy makes sense for large companies who can treat these loss leaders as longer-term investments. However, a small company can crumble quickly with this strategy.

Bait pricing also refers to a strategy of lowering prices. This strategy is short for bait-and-switch in which a company drastically lowers prices initially but includes hidden subsequent pricing. This strategy, if not employed correctly, can lead to fraud. However, there are a number of completely legal examples. One example is a men’s shaving razor company offering the first razor and blades for drastically low rates but then making the price of subsequent razors and blades market value. This strategy can be used to introduce a new brand to the market. Another form of bait pricing would be a clearance sale at a retailer.

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First things first—let us define some key terms. Leader pricing involves a retailer lowering the price of a product, at the expense of the profit margin. This is done to entice shoppers to a store, to introduce a new brand, or to promote a particular product.

Bait pricing, on the other hand, is a despicable practice involving advertising a product at a ridiculously low price while having no stock of this product, then attempting to coerce customers into buying a more expensive substitute.

The only thing these two practices have in common is that they are attempts to get more foot traffic into a store—one doing so ethically and the other unethically.

In terms of the marketing mix, these strategies will lower a price, move a product out of a store, and, in the case of leader pricing, provide an effective means of promotion.

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Both leader pricing and bait pricing involve advertising a product at a very low price, typically far below what it would normally sell for in the market and often even below what you paid to get it.

The difference is that under leader pricing, you actually do sell that product---often even taking a loss when doing so---while under bait pricing, you avoid actually selling the product by claiming it is "unavailable" whenever someone asks for it.

In both cases, businesses are reducing prices to sell a product, not to make more money on that product, but to make more money on other products; they assume (often correctly) that once you get people into your store they'll be more likely to buy whatever products you sell, including those that have high profit margins. The marketing mix is therefore a combination strategy between the leader product (or bait offer) and the more profitable products you hope to actually sell.

Both tactics can be considered unfair anti-competitive practices, and bait pricing especially is illegal in most jurisdictions. 

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