An item priced in an advertisement or in-store merchandising at substantially less than competition to attract customers to a particular store with the expectation that they will purchase items at full profit margins. Loss leaders are always sold at less than cost.
An item priced below the retailer's cost, meaning the merchant loses money on each unit sold. In both traditional as well as Web commerce, loss leaders are offered to draw customers into the store; where in theory they will also buy enough profitable items (during that visit or future visits). In this way, the merchant makes more money on the whole than if the customer had never stopped by.
In marketing, a loss leader (also called a key value item in the United Kingdom) is a type of pricing strategy where an item is sold below cost in an effort to stimulate other, profitable sales. It is a kind of sales promotion.