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The Loss-leader Model – What Is It?

In 2013, the global e-commerce sales turnover will top the $1 trillion mark. This gives an indication that Internet marketing will become more competitive. Therefore, the strategies that have worked in the past may not be effective in the future. You may be required to do some outside-the-box or lateral thinking and implement strategies such as the Loss-Leader Model to become a successful online marketer.

The loss-leader model is a marketing strategy that has been successfully implemented by supermarkets. It involves at-cost or below-cost selling of a couple of products that are very popular to stimulate the sales of other profitable products. The loss-leader model has been found to be effective since customers come back to buy popular products at great prices. Typically, the products advertised on TV are sold as loss-leader products.

If the loss leader model can be applied to online marketing, can it?

The Loss-Leader Model – Relevance in Internet Marketing

It is possible to apply the concept of lateral thinking and the loss-leader model for generating what are known as lateral keywords. A lateral keyword is one that has links to another keyword. The concept is best explained through an example. Consider the following sets of keywords:

  • Hosting, Domains
  • Baby Clothes, How to stop a baby crying
  • Dog Training, Dog Collars

You may notice that there exists a relationship between the keywords in each of the sets. Whereas the common theme in the first set is websites, it is baby and dog in second and third, respectively.

If you are promoting hosting services as an affiliate marketer, you can use the keywords that are related to domains as well. This is because those who are searching for information on domains will need hosting services sometimes in the future. Similarly, dog collars may not rake in the money that you want, but some visitors to your website will consider the dog training services that you offer. “Dog muzzle” is also a keyword that can be considered. It may be more related to training.

People who may have dogs that bite visitors would want dog muzzles and when they visit your website for buying a dog muzzle, they will happen to see the training services that you offer. If you display an advertisement for dog muzzle and target it towards training to stop biting, such visitors may buy your training service. This is just a simple illustration as to how the loss-leader model can be applied in the field of Internet marketing.

The Loss-Leader Model – Selection of Keywords

The illustration given above would have made it clear to you that the keywords must be selected in such a way that they are closely related to the product or service you ultimately want the visitors to your website to use. The strategy, therefore, should be to choose keywords that can be easily ranked to increase traffic to your site.

You should not worry if these keywords do not generate revenue for you. You will benefit more when people visit your website using these lateral keywords and buy the actual products or services you promote. This is how you can make the loss-leader model employed by supermarkets work for you.

Here is another illustration related to the application of the loss-leader model in online marketing. If you determine that people are searching for “Clickbank gravity”, you can create a blog post or a video about “Clickbank gravity”. People who are searching for “Clickbank gravity” will have a good understanding of affiliate marketing and you may benefit by keeping the details of such people in your mailing list. You may not be selling anything to these people, but you will be able to grow your list.

You could adopt this method of driving traffic for generating sales, if you feel that there is strong competition for certain keywords or if the search volume for your products and services are insufficient. Thus, the loss-leader model is applicable not only for sites, but YouTube videos as well.

Blogging as a Loss-Leader Model

The Loss-Leader Model – Blogging

Providing blogs on your website is another way of using the Loss-Leader Model. Though blogging is more relevant to e-commerce stores, they can be used on information websites also. By incorporating lateral keywords in your blogs, you can drive traffic to your money pages. If done effectively, this simple method may prove to be beneficial to you.

Thus, the loss-leader model can be effectively employed by you as part of your online marketing strategy to widen your reach and sell more of the products and services that you want to sell. You may not make huge profits through lateral keywords, but you will be able to drive more traffic to your website. If you are planning to implement the loss-leader model as part of your online marketing strategy, you should be prepared to invest some time and effort.