STANDOUT agencies don’t use “loss leaders”

If your marketing agency is losing money on work you do for a specific client, you are spending your own money to promote their brand.

No agency wants to lose money, but unprofitable work is a regular occurrence in agencies.

A frequent situation I come across is people saying they are using a client as a “loss leader”, i.e. they know they’re losing money on the account, but the brand is high profile and aspirational. The agency believes working with them will attract others.

The concept of the loss leader was developed by value based supermarkets. With thousands of regular repeat customers, these businesses operate on low margins but high volume. The odd product sold at below cost price, doesn’t matter if a shopper fills their trolley with higher margin goods. It also reinforces their value perception and attracts new shoppers.

This is a completely different business model. Loss leaders of any type are unsuitable for agencies.

STANDOUT agencies don’t use “loss leaders”

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