Whenever you go out and purchase a printer, Xbox console, or Kindle Fire tablet, know that each of these products should be sold at a much higher price. Why? What each of them has in common is being a "loss leader." This means that the companies that produce these products subsidize their price by selling them for below the manufacturing cost in hopes that its purchase will stimulate sales of other goods that will make up the difference.
For Xbox, this is the price of games and subscriptions. For Kindles and other e-readers, it's about selling e-books. Printers -- traditional and 3-D -- make their profits from the sales of ink (or in the case of 3-D printers, raw materials).
This model has been the norm in the printing industry for decades. Companies such as Hewlett-Packard
Tablets and e-readers
The "loss leader" model has also dealt Amazon
As technological developments change the way we consume information companies like these are making it a priority to put their products in the hands of consumers and worry about profits later.
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Below we have compiled a list of companies, most of which are mentioned above, who use a pricing strategy that incurs a loss at the outset for some of their signature products.
1. 3-D Systems
2. Hewlett-Packard: Offers various products, technologies, software, solutions, and services to individual consumers and small- and medium-sized businesses (SMBs), as well as to the government, health, and education sectors worldwide. Market cap at $44.19B, most recent closing price at $22.35.
3. Barnes & Noble
4. Stratasys: Engages in the development, manufacture, and marketing of three dimensional (3-D) printing, rapid prototyping (RP), and direct digital manufacturing (DDM) systems primarily in North America, Europe, and the Asia Pacific. Market cap at $1.B, most recent closing price at $47.12.
5. Microsoft: Develops, licenses, and supports a range of software products and services for various computing devices worldwide. Market cap at $246.57B, most recent closing price at $29.35.
6. Amazon.com: Operates as an online retailer in North America and internationally. Market cap at $98.05B, most recent closing price at $217.64.
7. Sony: Designs, develops, manufactures, and sells electronic equipment, instruments, and devices for consumer, professional, and industrial markets worldwide. Market cap at $13.65B, most recent closing price at $13.59.
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Kapitall's Dan Connelly does not own any of the shares mentioned above.
The Motley Fool owns shares of Microsoft.The Motley Fool has sold shares of Sony short. The Fool owns shares of Apple. The Fool owns shares of and has written calls on 3D Systems Corporation Common S. Motley Fool newsletter services have recommended buying shares of Stratasys, Apple, Amazon.com, Microsoft, and 3D Systems Corporation Common S. Motley Fool newsletter services have recommended creating a bull call spread position in Microsoft. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Motley Fool newsletter services have recommended writing puts on Barnes & Noble. The Motley Fool has a disclosure policy.