Subject: Re: FSB == Loss Leader Marketing?
From: lef@fianna.pls.com (Larry Fitzpatrick)
Date: Wed, 28 Jun 1995 10:38:03 +0500


Excuse if this is a newbie question

> From nelson@asylum.sf.ca.us Tue Jun 27 20:16 EDT 1995
> Peter wrote:
> > a "loss leader" is a good tactic for attracting customers
> > for other, profitable items.  The big company may actually 
> > make *more* money overall by selling some of its products 
> > below cost.
> 
> In fact, aren't many (most?) free-software businesses, by
> giving away a "lite" product to increase sales of a "pro" 
> version, using loss leader marketing tactics?  Or perhaps
> freely distributing "sample" software to promote their 
> (for hire) software development skills?

It appears to me that "giving away something to sell something else" is
really close to "spending money to sell something" which is sometimes
called marketing.  Perhaps someone with accounting expertise could
explain if (and how) accounting practices allow distribution of 'free'
goods to be considered a marketing expense?  I.e., can (should) the R&D
and cost of distribution be marketing expenses for the support (or
other product) operation?

Perhaps a related question is: does the means by which the expense is
accounted for affect whether or not it is "dumping"? 

> It seems to me small businesses have more to gain than do
> large, well-established corporations from this (at first 
> counter-intuitive) tactic....

Okay.  Said another way (I don't know if it's true):

	a large company can spend real dollars on a conventional
	marketing campaign while the small company has only its product
	"to spend in kind" for marketing.  Large companies engage in
	the "in kind" act less because they have verified that there are
	better ways to market (that is, realize more sales dollars)
	than to give away a "lite" version.

Is the last sentance true?

Cheers,
lef