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Word for a company that doesn't generate any profit on its own, but that generate, customers for its parent company. Someone told me there is a word for that but I have since forgotten it.

For example a fishing magazine company that loses money every month, but is kept alive, as the parent company which sells fishing gear needs the magazine to keep the interest for fishing up. Probably not the best example, but anyway...

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  • non-profit subsidiary ?
    – ermanen
    Commented Apr 21, 2014 at 17:46
  • I think the focus is not on non-profit but on the function that the auxiliary company does for the parent one.
    – user66974
    Commented Apr 21, 2014 at 17:51
  • If the subsidiary actually loses money, that's rather different to if it simply fails to make profits. But a subsidised subsidiary is a bit of a mouthful, so I'd call it something different, such as a subsidised offshoot of the parent company.
    – FumbleFingers
    Commented Apr 21, 2014 at 17:52
  • This is a good question and there is a term for this type of company division. Most would just call it the Marketing Division. It is implied that a marketing division wouldn't be directly profitable. However I still think there is a better business term. I did a thesis paper on Playboy and retaining their website at a loss (90s). I am sure I used a term for this...
    – RyeɃreḁd
    Commented Apr 21, 2014 at 18:02
  • 1
    It's a Cost Center.
    – Autoresponder
    Commented Apr 21, 2014 at 18:19

5 Answers 5

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In the context of commerce, it is referred to as a loss leader . Supermarkets used to sell coffee at a loss to attract customers, for example

See Business Dictionary

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  • This has nothing to do with the example. A loss leader drives competition away by forcing them to negative profit margin or increases sales inside your store by taking a hit on a few items.
    – RyeɃreḁd
    Commented Apr 21, 2014 at 17:42
  • @RyeɃreḁd I agree with you completely with regard to the desired result of loss leading. But I think the same principle underlies the Poster's example.......lose money on one effort to insure making more money on another.....*I can give away a computer printer if I can sell enough cartridges.*
    – Gary's Student
    Commented Apr 21, 2014 at 17:51
  • Yea but a division that helps market the sector isn't loss leading. When you buy a magazine for fishing you aren't required to buy specialized fishing gear from that company that produces the magazine to use the magazine.
    – RyeɃreḁd
    Commented Apr 21, 2014 at 17:58
  • @RyeɃreḁd Yes....I see your point....there should be a better word.
    – Gary's Student
    Commented Apr 21, 2014 at 18:04
  • Loss leader usually refers to a product rather than a subsidiary, but in this context it makes perfect sense and is probably the best answer.
    – B. Szonye
    Commented Apr 21, 2014 at 19:15
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The en vogue business practice for this seems to be not referring to the act as a loss but an investment that returns a profit. That is why some divisions are reverting from cost center practices to becoming profit centers. I would use neither of these terms because it is too subjective.

I am sure the company in question could go on forever saying that their magazine division is a cost center. Or they could get a new head of the magazine center that wants to turn it into a profit center (getting a bigger budget) by proving a greater return on marketing investment.

So a general term for your example is revenue engine.

The revenue engine of a company is the overall system by which buyers are made aware of a company's products or services, guided through an education period in which they form opinions and preferences, brought together with sales professionals at a time of mutual benefit if necessary, and ultimately helped to make a positive buying decision.

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I think you are referring to those business units usually called : Ancillary Business. These units are generally created to support the main business of the parent company.

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  • usually those generate product for the parent company to use as inputs, not generate customers.
    – Oldcat
    Commented Apr 21, 2014 at 20:46
  • They also generate customers!! A call center is a typical ancillary business, and as we all know, one of their main activities is contacting new potential customers offering phone and internet services on behalf of the the Phone Company they work with.
    – user66974
    Commented Apr 21, 2014 at 21:21
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I have heard of "feeder company" or "feeder companies" for this type of business, but currently unable to find any references to it. The feeder company 'feeds' the parent company with business, but claims none for itself. This type of company is normally used for minimizing its tax exposure or allowing it a certain amount of anonymity.

The closest with references is a "feeder fund" which whilst similar is not an exact match as is used solely for financial fund management.

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There are several answers to this depending on what kind of industry, business model, and demographic/audience.

In this instance, you're probably looking at a shell corporation. (A shell corporation is a company which serves as a vehicle for business transactions without itself having any significant assets or operations. Some shell companies may have had operations, but those may have shrunk due to unfavorable market conditions or company mismanagement.)

If this isn't it, let me know.

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