Loss leaders are words or phrases that typically have such a high cost that they have a negative conversion rate. However, the general thought with loss leaders is that a user is just starting their research with these highly competitive and costly terms.
For example, if a user searches for a decanter and clicks on a paid listing, that person will see a large list of options. The user will likely look around for a few minutes, not know what they really want, and head back to the search results for additional products. Depending on the product, most will look at several sites and find that many of them carry the same products.
The user will study which products they like and make a decision based on multiple factors. These factors include, but are not limited to, price, stock, shipping price, and customer service. Many users will pay more money for a product if they have a higher level of confidence with a merchant.
You can use an array of options to help provide an experience that can drive trust. Having seals or badges from shopping engines, such as Shopwiki.com and Bizrate.com, can increase confidence based on a third-party review.
Clearly displaying your phone number on all pages will also add a high level of trust. Making your contact information impossible to find or well hidden will cause many users to simply just drop off in order to work with a company they can talk to.
In most cases, orders aren't called in these days, as a level of trust is finally taking over. So most of your customer service costs will go to tracking orders, support, and returns.
If your return policy is easy to use and provides a promise to help them out for a certain period of time, the user will be more likely place an order with you.
Check out the policy at Zappos.com, which sells shoes and clothing. They believe when a user is thrilled, or "WOW'd" as they say, they'll come back and tell their friends. They're right! Zappos.com's growth is hard to keep up with!
Now that you've thought a little about loss leaders, think carefully. Can you actually provide compelling offers that will generate sales on a return visit?
Look at your long tail conversions. Are the users that have searched for a very specific product buying? If the answer is no, then you need to spend time on your product pages first.
Make sure they have the right layout to get the user to buy. This can only be done with multivariate testing. That involves creating from two to 20 variations of a product page that will be turned through at the same time until you learn which version converts best.
This isn't an easy undertaking and typically will require a dedicated testing team. In this economic market, I'd suggest using a firm such as Magnify360. They have a ton of experience building campaigns that drive huge conversion increases.
It's nearly impossible to optimize your site for loss leaders without an appropriate conversion strategy. You'll be very happy with the results when a strong team works on the connection of a vague first entry user coming back to a very specific and targeted result.