What tactic goes beyond leader pricing by reducing prices to below cost?

The correct answer is predatory pricing. This tactic involves setting prices extremely low, often below the cost of production, with the intention of driving competitors out of the market. The overarching strategy is to create a monopoly or gain market share by temporarily absorbing losses. Once competitors are weakened or eliminated, the business can raise prices back up to a profitable level.

Predatory pricing is distinct from loss leader pricing, which involves selling certain products at a loss to attract customers into a store or to encourage the purchase of other higher-margin items. While loss leader pricing is a more common and legal promotional strategy, predatory pricing crosses ethical and legal lines as it aims to harm competition directly.

Understanding this distinction is crucial in marketing, as predatory pricing may invite legal scrutiny or regulatory intervention, while loss leader pricing typically remains a viable marketing strategy.