Razor And Blades Business Model

The razor and blade business model is a strategy that relies on selling what is supposed to be the primary product at a low price or given away for free.

Razor and blades business model. The model involves selling the dependent item at a loss or offering it for free but selling the consumable product paid with it at a higher price. In the razor-blade business model is designed to encourage price of consumption over time. Razors are a relatively low-cost item and for some people a one-time investment.

The company also came up with the highly profitable business model of selling the razor for a low price and charging a premium for replacement razor blades. While complementary goods get sold at high margins. Instead a set of blades will be 3-4 times more expensive.

What is a Razor and Blades Business Model. For instance Gillettes razor would cost a few bucks. The bait and hook pattern also called razor and blade or the tied products model works in the way that the basic product is sold at a very cheap price in order to make profit by selling complementary products refills for a high price or simply increase sales of the profitable complementary product.

It is different from loss leader marketing and free sample marketing which do not depend on complementary products or services. Only its not just for consumer goods anymore and hasnt been for a long time. The razor and blades business model is a business model in which one item is sold at a low price in order to increase sales of a complementary good such as consumable supplies.

For example inkjet printers require ink cartridges and game consoles require accessories and software. This business model is now widely adopted think printers and cartridges for example and is called the razorrazor-blade business model commemorating its origins. Companies that have a razor-and-blade model use a pricing strategy that involves selling a durable product or razor at a low profit margin sometimes even giving it away to help drive sales of.

It was first used by Gillette to increase sales of its blades by offering hand held razors at throw-away prices in complimentary. The Razor and Blades Business Model is the strategic positioning of one product as free or complimentary in order to boost the sales of the actual revenue generating product. Gillettes Razor Blade business model reinforces the blue ocean strategy concept of buyer utility.