The Optical Vision Site

Loss Leader Pricing- Eyecare Profitability

Photo:marketingly.com

If you have ever wondered how an office can sell an eyecare product below wholesale? Chances are they are employing Loss Leader Pricing to drive consumers into their store. Loss leaders are goods or services offered at deep discounts (sometimes below cost) in order to attract new customers to a store. Loss Leader comes from the idea that an item is sold at a loss in order to lead the customer to another better selling or profitable item. (Think cell phones are free with 2 year contract)

There is a certain retail strategy in using loss leader pricing- 1.) You don’t want the consumer to stockpile product 2.) Profit and loss 3.) Profit on other items must make up for the loss leader.

Benefits of  Loss Leaders:

• Move Overstock: In the case of the Eyecare Professional selling eyeglass frames (at wholesale) to sell lenses and add ons. Your loss would only be the profit margin on frames and you could more than make up for it on the lens margins. By cutting the price, you should be able to move stock, reduce inventory, increase cash flow, and make room for new product plus saving time and money by not returning frames.
• Discontinuing a Product Line or Product is Not Longer Available: Nothing is worse than having 3-5 styles of a particular brand. Opticians tend to shy away from older and or discontinued product. Makes the frame area look old and dated. Most offices have at least 100′ go away’ frames’. Loss Leader pricing can help you get rid of them quickly!
• Brand Awareness: You are losing sales on branded product due to competition and or the Internet. Consumers may not know you carry that particular brand, advertising a special ‘brand promotion’ will increase brand awareness.
• Change Image: Maybe you lost some patients because they think (thought) you were too expensive. While that may not be the case, you can change patients/consumer perceptions by offering a Loss Leader Sale.
• Increased Traffic: People like sales. People will shop for sales. Loss leaders can be used as a marketing tool, Facebooked, Tweeted and more to increase your talk factor.
• Competitive Advantage-
• Good for Word of Mouth Referrals-
• Gain new patients

Merchandising Loss Leaders

• Usually Loss Leaders would be placed in the back of the office or in a hidden corner. The key is having the consumer walk by profitable items to get to the Loss leaders.
• Don’t scatter loss leader around, put in a section with signage!
• Advertise, Facebook, Twitter, and media are important to spread the word.

Loss Leader Precautions

• Some optical vendors will not allow their product to be discounted.
• Check state laws to seel if it is allowed to sell products below wholesale.
• Make sure you and staff know and understand the retail strategy to move product and focus on profitable items. You don’t want to advertise products and then have the staff avoid selling them.
• Make the disclaimer on any advertising ‘while product lasts’ or limited quantities

Is this viable for the ECP? I believe using Loss Leader pricing at certain times of the year (particularly at the last quarter) can increase sales, decrease inventory  and bring in new traffic, especially now going into our last couple of months and a good way to get people to use their flex benefits!

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