- Life After Five
- Posts
- 💰Loss Leader Method
💰Loss Leader Method
How to get new customers FAST, and maximise profits.
Dyani Janga
February 05, 2025
One of the first questions you’ll ask yourself in any business is “How will I get customers?“
Every business needs customers, since they are the ones paying you.
If you didn’t know, cashflow is the lifeblood of every business. Once you stop receiving payments, your business will die soon after.
So let’s answer this painstaking question…
🤔 How Will I Get Customers?
In order to get customers, you need to get in contact with them. There are 4 ways of getting in contact with customers 👇🏽
Cold Outreach
You reach out to people who don’t know you.
Warm Outreach
You reach out to people who do know you.
Post Content
You publish content on social media and push people to your offer.
Run Paid Ads
You run advertisements and push people to your offer.
Through these actions, you can find people who’re interested in what you’ve got for them. From there you can chat with them or send them to a landing page where they can buy something from you.
If they haven’t bought anything yet, but you do have a form of contacting them—they are called leads.
Now you understand how to get customers, you need to know how to maximise profits.
So I’m going to teach you the Loss Leader Method.
💰 Loss Leader Method
When you go to the movies, the cinema doesn’t make any significant profits on selling tickets—but they do on selling drinks & snacks.
This is the Loss Leader Method in full effect.
You don't make much money from the initial sale you make. But once you have a customer, you can sell complimentary products/services at higher prices, which is where you’ll actually make a profit.
The cheap movie tickets attract people, and once they're there, they spend more on the high-margin items—Drinks & snacks.
You offer something at little to no profit (or even a small loss) to drive sales of more profitable items.
More examples are 👇🏽
Printers & Ink: The printer is cheap, but ink cartridges are expensive.
Razors & Blades: The razor is cheap, but replacement blades cost a lot.
But maybe the best example of the Loss Leader Method is the game called Fortnite.
People can download the game for free, and have the opportunity to buy different limited edition skins every day. These skins can cost up to 2000 V-Bucks ($20).
Fortnite makes a loss by giving the game away for free.
But they’ve generated over $1 billion in revenue through microtransactions—with probably around 70-95% profit margins.
Most entrepreneurs focus merely on trying to get that initial sale at a maximum profit. But the smart ones focus on making that first sale and maximising Life Time Value.
As the great marketer Dan Kennedy once said:
The first sale is to get the customer, not to make a profit.
🔑 Key Take Away
Don’t focus on making a profit from the first sale—focus on acquiring the customer.
📖 Book Bit
The most dangerous number in business is one. The biggest mistake businesses make is trying to make a profit on the first sale. The purpose of the first sale is to get a customer.
No B.S. Direct Marketing - Dan Kennedy
You can attract customers with a low-cost (or free) offer and then maximise profits by selling them higher-margin products over time. The real money is made in the LTV of a customer, not in one-off sales.
Smart entrepreneurs think long-term. They create systems where customers keep coming back and spending more.
👞 Action Step
Identify a low-cost or free offer to attract customers, then create a plan to upsell high-margin products.
Reply