Too often, people create loss leader products and services under the impression that these will be “gateways” – that customers will buy more. That is in fact where the concept began – the word leader meant that by leading customers to your business, they would see all the other wonderful things you can do for them.

Well along the way, loss leaders began to mean entry level offerings. And the public got wise, and began shopping around in search of these bargains. The trend has become that a very small number of customers in need of entry level offerings move on to your more profitable products and services.

So how do you make any of this work for you in the current competitive markets? First off, understand that you have different aims in entry level and gateway services. Think of entry level services as extension into new markets, with the aim of establishing cash flow. Think of gateway services as business development.

Create entry level services/products that leverage your core strengths, but still allow you to be profitable, by clearly drawing a box around cost, timeline, and deliverable. Well defined entry level offerings take the risk out for first time buyers, and help you establish a source of cashflow from small, easily replicated offerings.

Gateway services require a bit more thought. They should be as close as possible to your best – but have limitations on deliverables, or more often timeframe. Think of these as a trial offer – to give customers a taste of how good it can be, if only they were willing to spend the money. Don’t ever design gateway services/products to lose money, but keep the bottom end at least break-even.

For service providers, there are ways to bridge entry level offerings with gateway services. Two simple methods are to add an a la carte menu to your entry level, or use it as the first step in a program. Just don’t be disappointed if it is treated as merely a low cost entry level offering, by shop-around savvy consumers.

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