The Economics of Free
Loss Leaders and Bundles
Shops sell some products at or below cost to attract customers who then buy other, profitable goods.
Free or cheap to lure you.
Loss leader
A supermarket sells milk cheaply to bring shoppers in.
Razor and blades
Sell the device cheaply and earn on refills or cartridges.
Bundling
Adding a free item to a purchase makes the whole deal seem attractive.
Consumer tip
Look at total spending, not only the discounted item.
A printer
A printer is sold cheaply, but the ink cartridges are expensive.
Judging a deal by the free item alone
Check the full cost.
Key takeaways
- Loss leaders attract customers.
- Razor-and-blade models earn on refills.
- Bundles add perceived value.
- Check total spending.
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