Sunday in 1985, Costco set the price for their hot dog and soda combo. $1.50. That was almost 40 years ago. Today the price is still $1.50. But along the way, inflation happened. Costs went up. Price stayed frozen. In 2009, the CFO approached CEO Jim Sinegal with a suggestion. We need to raise the hot dog price. We're losing money on every single one. Sinegal looked at him and said, if you raise the price of the hot dog, I will kill you. He wasn't joking.

The CFO never brought it up again. Today, each hot dog costs Costco about $2 to make and sell. They sell it for $1.50. Losing 50 cents on every hot dog sold, they sell over 100 million hot dogs per year. That's 50 million in losses annually, on purpose. So why does Costco do this? Because the hot dog isn't the product. You are. The hot dogs are placed at the back of the store. You walk past everything to get there. Impulse buys everywhere. And the $1.50 price is so famous,

It gets people in the door. You come for the cheap hot dog. Leave with $200 in groceries, electronics and random stuff you didn't plan to buy. Costco even built their own hot dog manufacturing plants.  Just to keep control of costs.  Most companies would have raised it years ago. But Costco understands something others don't.  The hot dog is marketing, not food. It's a loss leader.  The bait that gets you into the store.  This strategy works everywhere.  IKEA sells cheap breakfast.  Loses money.


gets families in early who then shop for hours.  Amazon loses money on Prime shipping, but Prime members spend twice as much.  The lesson?  Strategic losses create overall wins.  Don't think about profit per item.  Think about profit per customer.