DECA Sports and Entertainment Marketing Practice Exam

What is the primary purpose of loss leader pricing?

1. To maximize profit margins on all products

2. To encourage repeat business by offering loyalty rewards

3. To draw customers into the store with low-priced items

4. To drive customers to online shopping platforms

The correct answer is: To draw customers into the store with low-priced items

The primary purpose of loss leader pricing is to draw customers into the store with low-priced items. This pricing strategy involves setting the price of certain products below their market cost to attract consumers. Retailers often use this approach to increase foot traffic, as customers are typically motivated to visit the store for the appealing deals. Once inside, customers may be inclined to purchase additional items that are not priced as aggressively, which can lead to overall increased sales for the retailer. This strategy is effective because it targets the shoppers' desire for bargains, while potentially boosting sales of other products that have higher profit margins. The other options focus on maximizing profits, encouraging loyalty, or driving online shopping, which aren't the core objectives of loss leader pricing. Instead, the emphasis is on using strategically low prices to attract customers, making them a central aspect of this pricing model.