--- title: "Loss Leadership & Price Perception: Why Retailers Sell Products at a Loss" description: Some retailers' business is built on loss leadership, and here price perception plays a key role. Learn more about how and why retailers sell products at a loss image: https://blog.pricebeam.com/hubfs/Blog/money-euro-coins-currency-332304.jpeg --- [Skip to content](https://blog.pricebeam.com/loss-leadership-price-perception-why-retailers-sell-products-at-a-loss#main-content) [![PriceBeam](https://blog.pricebeam.com/hs-fs/hubfs/lead-flow-images/PBLogoTransparent%20(1).png?width=400&height=100&name=PBLogoTransparent%20(1).png)](https://www.pricebeam.com/) - Solutions ![RGM360](https://blog.pricebeam.com/hs-fs/hubfs/RGM360_Headlines.png?width=319&height=255&name=RGM360_Headlines.png)[PriceBeam RGM360](https://www.pricebeam.com/rgm360) is an end-to-end Revenue Optimization Platform, offering unmatched value by integrating market research, internal data with AI and next-generation simulation and optimization tools. Predictive Research - [Predictive Revenue Research](https://www.pricebeam.com/predictive-research) - [Willingness-to-Pay](https://www.pricebeam.com/willingness-to-pay) - [Comparative Willingness-to-Pay](https://www.pricebeam.com/comparative-willingness-to-pay) - [Value Attributes / Choice-Based Conjoint](https://www.pricebeam.com/value-attributes) - [Price Pack Architecture](https://www.pricebeam.com/ppa-price-pack-architecture-study) - [Promotion Lab](https://www.pricebeam.com/promotion-optimization) - [Promotion Lab Enhanced](https://www.pricebeam.com/promotion-lab-enhanced) - [Assortment Lab](https://www.pricebeam.com/assortment-optimization) - [Core / Basic Survey](https://www.pricebeam.com/core-study) - [Ranking Analysis / MaxDiff](https://www.pricebeam.com/ranking-analysis-maxdiff) - [Menu-Based Conjoint](https://www.pricebeam.com/menu-based-conjoint-analysis) - [RGM Study](https://www.pricebeam.com/revenue-growth-management) - [RGM Study - Promotion](https://www.pricebeam.com/revenue-growth-management-promotion) - [RGM Study - Ultra](https://www.pricebeam.com/revenue-growth-management-ultra) - [Concept Test](https://www.pricebeam.com/concept-test) - [Claims Test](https://www.pricebeam.com/claims-test) - [Product Variant Test](https://www.pricebeam.com/product-variant-test) - [FAQ](https://www.pricebeam.com/faq) RGM Data Lake - [RGM Data Lake](https://www.pricebeam.com/rgm-data-lake) - [Prescriptive Analytics](https://www.pricebeam.com/rgm-data-lake-prescriptive-analytics) - [Stakeholder Communication](https://www.pricebeam.com/rgm-data-lake-stakeholder-communication) - [Data Integration](https://www.pricebeam.com/rgm-data-lake-data-integration) - [FAQ](https://www.pricebeam.com/rgm-data-lake-faq) Simulation & Optimization - [RGM Optimizer & Simulator](https://www.pricebeam.com/rgm-optimizer-simulator) - [AI: Virtual Customer Modelling](https://www.pricebeam.com/ai-virtual-customers) - [RGM Simulation](https://www.pricebeam.com/rgm-simulation) - [Prescriptive Optimization](https://www.pricebeam.com/rgm-prescriptive-optimization) - [FAQ](https://www.pricebeam.com/rgm-optimizer-simulator-faq) - Industries & Challenges Industries - [FMCGs/CPG](https://www.pricebeam.com/consumer-goods-pricing) - [Cosmetics](https://www.pricebeam.com/cosmetics-pricing) - [Beverages](https://www.pricebeam.com/beverage-pricing) - [Beer, Wine & Spirits](https://www.pricebeam.com/alcoholic-beverage-pricing) - [Apparel](https://www.pricebeam.com/apparel-pricing) - [Home Care](https://www.pricebeam.com/home-care-pricing) - [Home Appliances](https://www.pricebeam.com/home-appliances-pricing) - [Food Products](https://www.pricebeam.com/food-products-pricing) - [Pet Food](https://www.pricebeam.com/pet-food-pricing) - [DIY & Home Improvement](https://www.pricebeam.com/diy-pricing) - [Consumer Services](https://www.pricebeam.com/consumer-services-pricing) - [Media & Publishing](https://www.pricebeam.com/media-and-publishing-pricing) - [Hotels & Hospitality](https://www.pricebeam.com/hospitality-pricing) - [Subscription Services](https://www.pricebeam.com/subscription-services-pricing) - [Phones & Telecom](https://www.pricebeam.com/telecommunication-pricing) - [Memberships](https://www.pricebeam.com/membership-pricing) - [Training & Education](https://www.pricebeam.com/training-and-education-pricing) - [Retail](https://www.pricebeam.com/retail-pricing) - [E-commerce](https://www.pricebeam.com/ecommerce-pricing) - [Events](https://www.pricebeam.com/event-pricing) - [Sports Subscriptions](https://www.pricebeam.com/sports-subscription-pricing) - [Streaming](https://www.pricebeam.com/video-on-demand-pricing) - [Consumer Electronics](https://www.pricebeam.com/consumer-pricing-electronics) - [Start-ups](https://www.pricebeam.com/entrepreneur-pricing) - [SaaS & Software](https://www.pricebeam.com/saas-software-pricing) - [Consumer Finance](https://www.pricebeam.com/consumer-finance-pricing) - [Equity Analysis](https://www.pricebeam.com/equity-analysis-pricing-insights) - [Veterinary Products](https://www.pricebeam.com/veterinary-products-pricing) - [OTC Pharmaceuticals](https://www.pricebeam.com/otc-pharmaceuticals-pricing) - [Automotive](https://www.pricebeam.com/automotive-pricing) - [Auto Aftermarket](https://www.pricebeam.com/automotive-aftermarket-pricing) Pricing Challenges Solved - [Pricing New Products](https://www.pricebeam.com/pricing-new-products) - [Brand Health & Pricing](https://www.pricebeam.com/brand-health-pricing) - [M&A Pricing](https://www.pricebeam.com/mergers-and-acquisitions-pricing) - [Investment Portfolios & Pricing](https://www.pricebeam.com/portfolio-growth-pricing) - [Price Segmentation](https://www.pricebeam.com/price-segmentation) - [Sales Team & Pricing](https://www.pricebeam.com/sales-team-pricing) - [International Pricing](https://www.pricebeam.com/international-pricing) - [Navigating New Tariffs](https://www.pricebeam.com/tariffs) - [Price Optimization](https://www.pricebeam.com/price-optimization) - [Price Increases](https://www.pricebeam.com/price-increase-management) - [Pricing Strategy](https://www.pricebeam.com/pricing-strategy) - [Psychological Pricing](https://www.pricebeam.com/psychological-pricing) - [Value-Based Pricing](https://www.pricebeam.com/value-based-pricing) - [Lifecycle Pricing](https://www.pricebeam.com/lifecycle-pricing) - [Market Launch Pricing](https://www.pricebeam.com/market-launch-pricing) - [Value Communication](https://www.pricebeam.com/value-communication) - [Assortment Pricing](https://www.pricebeam.com/assortment-pricing) - [Promotions & Discounts](https://www.pricebeam.com/promotion-pricing) - Plans - [Plans overview](https://www.pricebeam.com/plans) - [Predictive Research Plans](https://www.pricebeam.com/predictive-research-plans) - [RGM Data Lake Plans](https://www.pricebeam.com/rgm-data-lake-plans) - [RGM Optimizer Plans](https://www.pricebeam.com/rgm-optimizer-simulator-plans) - [Pricing Power Tracker](https://www.pricebeam.com/pricing-power-tracker) - [Pricing Power Snapshot](https://www.pricebeam.com/pricing-power-snapshot) - Resources - [Webinars](https://www.pricebeam.com/resources) - [Blog](https://blog.pricebeam.com) - [Case Studies](https://www.pricebeam.com/customer-case-studies) - [Newsletter](https://www.pricebeam.com/newsletter) - [RGM Pulse Survey 2026](https://www.pricebeam.com/rgm-pulse-survey-2026) - About - [Company](https://www.pricebeam.com/about) - [News & Events](https://www.pricebeam.com/news) - [Partners](https://www.pricebeam.com/partners) - [Press](https://www.pricebeam.com/press) - [Careers](https://www.pricebeam.com/careers) - [Contact](https://www.pricebeam.com/contact) ![Search icon](https://5018647.fs1.hubspotusercontent-na1.net/hubfs/5018647/Design/Icons/Font%20Awesome/search.svg) [All posts](https://blog.pricebeam.com/all) September 19, 2017 # Loss Leadership & Price Perception: Why Retailers Sell Products at a Loss ![Picture of PriceBeam](https://blog.pricebeam.com/hs-fs/hubfs/Images/PBLogoBadge240x240.png?width=50&name=PBLogoBadge240x240.png)   PriceBeam  ·  2 minute read # ![loss leadership](https://blog.pricebeam.com/hs-fs/hubfs/Blog/money-euro-coins-currency-332304.jpeg?width=1024&name=money-euro-coins-currency-332304.jpeg "loss leadership") Despite increasing proficiency in logistics and operations in supermarket giants, some prices they set are so low that they seem almost too good to be true. How can one possibly make money selling a gallon of milk at $4? In some cases, you can’t. In the pursuit of loss leadership, retailers have actually cut prices to a point where they’re making a loss. A recent report on Walmart’s pricing suggested that the retailer made a loss of around 10% on eggs, and as much as 25% on milk. While selling products at a loss contradicts common business sense, most people will, of course, buy several items, many of which are high-margin products. However, there is more to loss leadership than having the lowest prices – if low prices were all it took, the race to the bottom would simply be won by the retailer with the strongest finances. And there are several examples where the retailer with the lowest price-level is not perceived as such: in 2016, The Independent reported that the UK upscale-retailer [**Waitrose made the top of their list of best-value supermarkets**](http://www.independent.co.uk/news/business/news/britains-cheapest-supermarket-waitrose-comes-top-of-which-annual-best-buy-rankings-for-own-brand-a6792856.html) in the UK – however, Waitrose is perceived as being one of the most pricey supermarkets in the UK. Ergo, price level is far from the only determinant of loss leadership; what is equally important is selecting the *right items*. In this regard, we talk about items that drive **price perception**, i.e. items that have a relatively strong influence on how expensive or inexpensive supermarkets are perceived to be by customers. These are typically value-items such as dairy, snacks, value-packs, but also other everyday products such as ground beef and frozen food items. However, identifying items that drive price perception is not as easy as it used to be since the increasingly intelligent and sophisticated selection of these items have resulted in a wider range of products being used to drive price perception and pursue loss leadership. Simply using your intuition is no longer sufficient.   **What type of products drive price perception?** If you are trying to create a low-price perception, it’s because you’re hoping to attract price sensitive customers who would go to the competitor if he finds them cheaper. [**Price sensitivity**](https://blog.pricebeam.com/4-factors-that-influence-price-sensitivity-of-customers)is key, and it will depend both on the customer’s general price sensitivity (e.g. determined by his income level and wealth), but also the item that he is buying. You can read more about the variables that determine what determines the price elasticity of a certain product in [**this article**](https://blog.pricebeam.com/using-price-elasticity-in-dynamic-pricing-models). Essentially, you want to identify products with *high price elasticity* that are purchased by *price sensitive customers*. It is useless to drop prices of a product with high price elasticity if it is purchased by customers with low price sensitivity.   **Driving Price Perception With Data** In order to identify what products price sensitive customers buy, and the corresponding price elasticity of the given products, it requires the use of customer data and experimenting with slightly altering prices. How does **Customer A** react to the higher price level of goods he commonly consume? And what goods does he commonly consume? These are questions that you need to extract from loyalty card data and the like, and that is exactly what retailers such as Walmart do.   Read more about [**price perception here**](https://blog.pricebeam.com/price-perception-and-how-to-manage-it) Share: [facebook-f icon](http://www.facebook.com/share.php?u=https://blog.pricebeam.com/loss-leadership-price-perception-why-retailers-sell-products-at-a-loss) [linkedin-in icon](http://www.linkedin.com/shareArticle?mini=true&url=https://blog.pricebeam.com/loss-leadership-price-perception-why-retailers-sell-products-at-a-loss) [twitter icon](https://twitter.com/intent/tweet?url=https://blog.pricebeam.com/loss-leadership-price-perception-why-retailers-sell-products-at-a-loss) [pinterest-p icon](http://pinterest.com/pin/create/link/?url=https://blog.pricebeam.com/loss-leadership-price-perception-why-retailers-sell-products-at-a-loss) [envelope icon](mailto:?body=https://blog.pricebeam.com/loss-leadership-price-perception-why-retailers-sell-products-at-a-loss) ## Related posts [![pexels-photo-128904.jpeg](https://blog.pricebeam.com/hubfs/Blog/pexels-photo-128904.jpeg)](https://blog.pricebeam.com/nike-lowers-pricing-as-adidas-grows-stronger) #### [Nike Lowers Pricing as Adidas Grows Stronger](https://blog.pricebeam.com/nike-lowers-pricing-as-adidas-grows-stronger) [![PPA ](https://blog.pricebeam.com/hubfs/PPA%20items%20+%20Screen%20visuals.png)](https://blog.pricebeam.com/ppa-how-to-build-ladders-consumers-trust-and-retailers-approve) [PPA](https://blog.pricebeam.com/topic/ppa) #### [Price Pack Architecture 2.0: How to Build Ladders Consumers Trust and Retailers Approve](https://blog.pricebeam.com/ppa-how-to-build-ladders-consumers-trust-and-retailers-approve) [![shutterstock_129949730_L.jpg](https://blog.pricebeam.com/hubfs/Blog/shutterstock_129949730_L.jpg)](https://blog.pricebeam.com/why-retailers-are-dropping-the-.99-price-tag) #### [Why Retailers Are Dropping the .99 Price Tag](https://blog.pricebeam.com/why-retailers-are-dropping-the-.99-price-tag) **Pricing Right, Made Easy** Almost all companies struggle to price right. They use methods such as cost plus a fixed margin. They use guesses and gut feel. They peg their price to a competitor’s. They price themselves too low, leaving money on the table, or too high, forsaking sales volume. They lose out on the profits they should be earning. PriceBeam changes all that. With a methodology that is confirmed to be accurate in thousands of projects, PriceBeam provides AI-powered market insights software that generates actionable insights into consumers' willingness-to-pay, competitive price positioning, packaging and assortment dynamics, promotional benchmarking, and opportunities from new product pricing. [facebook-f icon](https://www.facebook.com/pricebeam) [Follow us on LinkedIn](https://www.linkedin.com/company/pricebeam) [twitter icon](https://twitter.com/pricebeam) [Follow us on Instagram](https://www.instagram.com/pricebeam) [Follow us on YouTube](https://www.youtube.com/c/pricebeam) **Company** [About](https://www.pricebeam.com/about) [Careers](https://www.pricebeam.com/careers) [Press Resources](https://www.pricebeam.com/press) [Partners](https://www.pricebeam.com/partners) [Contact Us](https://www.pricebeam.com/contact) [Terms](https://www.pricebeam.com/terms) [Prize Draw Terms](https://www.pricebeam.com/prize-draw-terms) [Privacy](https://www.pricebeam.com/privacy) **Resources** [Blog](https://blog.pricebeam.com) [Get a Demo](https://www.pricebeam.com/demo) [Webinars](https://www.pricebeam.com/resources) [Downloads](https://www.pricebeam.com/resources) [Newsletter](https://www.pricebeam.com/newsletter) Copyright © 2026 by PriceBeam. All Rights Reserved ![](https://dc.ads.linkedin.com/collect/?pid=32758&fmt=gif) ![](https://px.ads.linkedin.com/collect/?pid=32758&fmt=gif) ```json { "@context" : "https://schema.org", "@type" : "BlogPosting", "author" : { "@type" : "Person", "name" : "PriceBeam", "url" : "https://blog.pricebeam.com/author/pricebeam" }, "datePublished" : "2017-09-19T12:00:00.000Z", "headline" : "Loss Leadership & Price Perception: Why Retailers Sell Products at a Loss", "image" : [ "https://blog.pricebeam.com/hubfs/Blog/money-euro-coins-currency-332304.jpeg" ], "mainEntityOfPage" : { "@id" : "https://blog.pricebeam.com/loss-leadership-price-perception-why-retailers-sell-products-at-a-loss", "@type" : "WebPage" }, "publisher" : { "@type" : "Organization", "logo" : { "@type" : "ImageObject", "url" : "https://blog.pricebeam.com/hubfs/lead-flow-images/PBLogoTransparent%20(1).png" }, "name" : "PriceBeam" } } ``` ```json { "@context" : "http://schema.org", "@type" : "Organization", "contactPoint" : [ { "@type" : "ContactPoint", "contactType" : "sales", "telephone" : "+44 207 081 2770" } ], "name" : "PriceBeam", "sameAs" : [ "https://www.facebook.com/pricebeam", "https://www.linkedin.com/company/pricebeam", "https://twitter.com/pricebeam", "https://www.youtube.com/c/pricebeam" ], "url" : "https://www.pricebeam.com" } ```