62 INDUSTRIAL DISTRIBUTION / September/October 2014 www.inddist.com
Your competition offers a deal so enticing that the cus- tomer finds it tough to refuse. A loss-leader does not have to end up as a lost sale for you. The problem is that
salespeople struggle to respond and want to match the competitor’s deal. These ideas will help you formulate a response.
Change your optics. View this deal from the competitor’s
perspective. Why would that competitor choose to do this?
Companies use loss-leaders to buy business. It is a form of penetration pricing — buy share and make it up some other way.
The competitor may not see any other way to differentiate
than to offer a cheaper price. In a sense, the competitor admits
to a lack of imagination and innovation. Cheap prices are not
innovative. Maybe the competitor is desperate for business. Do
you want to mask their desperation by matching their pricing?
No. You must shine a spotlight on this desperation.
When the customer responds to this overture, it is a purely
emotional reaction. They are reacting to a deal. Deals trigger
chemical reactions in the brain that reason cannot override.
The point is that you cannot win a rational argument with
an emotional buyer. You must fight fire with fire — in this
case, emotion. Use the benign introduction of fear to stir the
buyer’s concerns about this deal. Ask questions that may cause
the buyer to re-think the offer: Aren’t you curious about this
offer? Are you concerned that they want to offer this option
so cheaply? Why do you think they are doing this? If they are
giving this away for this price, where do you think they are
making it up? Be careful, though. You do not want to put the
buyer in a position that he or she feels the need to defend the
Is this offer the real deal? Is the competition offering real
value or faux value? It could be that the offer is really smoke
and mirrors and of no real practical benefit to the customer. It
just sounds good. This is the argument many customers will use
for extended warranties. They respond, “If I didn’t think the
product was any good to begin with, I wouldn’t buy it from
the start. Why would I bet that it will break?” Faux value is
perceived value that rarely matters. The intensity with which
Responding to a Loss-Leader
Strictly for Sales
BY TOM REILLY
retailers press extended warranty signals to the buyer that it is
more of a profit center than cost center for the retailer.
Oftentimes, with an objection like this, it is useful to re-
frame it as another product feature and build a response based
on that. For example, what if the color of your product (not
really that important in the operational sense) is different
than what the customer wants? You would probably argue
that your alternative features and benefits overshadow this.
How do your alternative features and benefits overshadow
the loss-leader? In the process of using this analogy, ask the
customer if that loss-leader is mission-critical.
Value-subtraction or substitution is a viable response to
loss-leaders. Explain to the buyer that you too could offer
loss-leader pricing if you were to trim your value in other
areas. When you present this rebuttal, refer to those areas of
value that appeal to this buyer. It demonstrates that to lower
your price, you must reduce your value. This plants a seed of
doubt in the buyer’s mind that the competitor must be cutting
back somewhere else.
Major discount stores notoriously select high-visibility items
to price as loss-leaders. These retailers offer over 100,000 SKUs
and target 100 or so commodity items to draw people into
their stores. The theory is that people will buy other, more
profitable items while they are there. It generally works or
they would not continue to do it. Most savvy buyers know this.
Your customers know this. This raises doubt in the buyer’s mind
that the competitor’s overall value is as good as the promise of
the loss-leader. This is where reason begins to temper emotion.
Modeling the behavior of a competitor is not a viable re-
sponse. It is too ‘me-too.’ It adds to the sameness phenomenon
that confuses customers. It demonstrates a lack of creativity or
marketing laziness. If the competitor chooses to offer a cheap
price to stir the passions of the buyer, respond. Do not respond
with your own version of a cheap price. Respond with creativ-
ity and initiative. If the competitor has admitted that they
cannot compete on any other playing field than price, this may
be the most important admission they can make to the market.
Use it to your advantage.
Tom Reilly is literally the guy who wrote the book on Value-Added Selling. You may visit him online at
Is this offer the real deal? Is the competition
offering real value or faux value?