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A clothes retailer reduces the price of its jeans below cost price in order to attract customers - HSC - SSCE Business Studies - Question 7 - 2001 - Paper 1
Question 7
A clothes retailer reduces the price of its jeans below cost price in order to attract customers. Which of the following describes this action by the retailer? (A) L... show full transcript
Worked Solution & Example Answer:A clothes retailer reduces the price of its jeans below cost price in order to attract customers - HSC - SSCE Business Studies - Question 7 - 2001 - Paper 1
Step 1
Identify the concept
Answer
The action of reducing prices below cost to attract customers is commonly referred to as a 'loss leader' strategy. This marketing tactic aims to draw in customers by offering certain products at a loss, with the hope that they will purchase additional items at regular prices.
Step 2
Determine the correct answer choice
Answer
Given the definitions of the terms provided:
- (A) Loss leader: Correct choice, as it accurately describes selling a product at a loss to attract customers.
- (B) Market leader: Refers to a company with a leading position in the market, not relevant in this context.
- (C) Strategic leader: This term generally pertains to organizations leading in strategic management or innovation, not applicable here.
- (D) Production leader: This term is not applicable as it focuses on leadership in production capabilities, not pricing strategies. Thus, the correct answer is (A) Loss leader.