Mkt 501 Essay

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Touro University International Ofelia Webb Strategic Marketing (MKT 501) Module 1 – Case Dr. Thomas Klein INTRODUCTION Throughout this paper I will provide the reader with what Wal-Mart used as its primary “yardstick” in 2003 and 2004 to price its line of toys and why it did so. I will also attempt to highlight alternative methods utilized to determine a price for a marketer’s assortment and why Wal-Mart used some of its most popular toys as “loss leaders”. In marketing, the use of a “loss leader” is utilized in an attempt to stimulate other profitable sales. Vendors expect their customers to purchase other items at the same time as the loss leader and that the profit made on these items will be such that an overall profit is generated. For example, Wal-Mart uses some their most popular toys as a loss leader which is leading to the potential ruin of toy-only competitors like Toys-R-Us. There are several characteristics of loss leaders presently used by Wal-Mart. First, Wal-Mart typically places loss leaders at the back of a store, so that customers must walk past racks of other displayed goods which have higher profit margins in order to get to the stores toys displays. Second, Wal-Mart’s loss leaders are usually products that customers purchase frequently: thus they are aware of the usual price and that the offered price is a bargain. Third, items normally offered as loss leaders are often large or fragile, making it difficult for the customers to buy in bulk so as to avoid repeat visits to Wal-Mart and lastly, in some instances, loss leaders are displayed on the floor or left dirty, scratched, or broken so potential customers are enticed to buy the model that is a “step up”. All in all, loss leaders serve to build customer relationships. For example, Wal-Mart will slash prices on hot toys such as “Bratz and Hot Wheels” for the

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