Razor And Blade 39#
The basic product is cheap or given away for free. The consumables that are needed to use or operate it, on the other hand, are expensive and sold at high margins. The initial product's price lowers customers’ barriers to purchase, while the subsequent recurring sales cross-finance it. Usually, these products are technologically bound to each other to further enhance this effect.
Examples: Iconic Cases
How they do it: The Amazon Kindle e-reader sold through Amazon.com is very competitively priced. Through the offer of e-books and other media formats to be used on the Kindle device, the revenue potential from these is far bigger than the price for the physical device.
Learn more about Amazon Kindle →
How they do it: Gillette is the name giver of the razor and blade business model. Selling its razors at a loss / at cost, it creates a lock-in effect and can make a profit with consumables compatible with the razor, which has a significantly higher profit margin.
Learn more about Gillette →
How they do it: Nespresso coffee system is protected by more than 100 patents. This allowed the company to keep competitors from selling coffee capsules compatible with the Nespresso system similar to printer companies. The coffee machines usually come at a low price with a large amount of test capsules from Nespresso. Over the lifetime of the device the customer usually spends much more on the high-margin coffee capsules.
Learn more about Nestlé Nespresso →
How they do it: Hewlett-Packard sold both inkjet and laser printers individually as well as in multi-function products incl. scanner, copier and fax functionalities. Whereas the electronic products were sold at low prices, the company earned a lot of money with the special ink cartridges as a consumable.
Learn more about Hewlett-Packard →
How they do it: Although the iPhone is not given away for free, Apple uses it as a platform to access to much more revenue opportunities through apps and other services beyond the pure hardware revenue.
Learn more about Apple iPhone/AppStore →
Below, the top industries for the pattern "Razor And Blade" are displayed, in order to get insights into how this pattern is applied across different industries. We've collected data from 5 firms using this pattern.
Top Industries
24% of firms using pattern
10% of firms using pattern
9% of firms using pattern
All Industries
Below, the pattern "Razor And Blade" is analyzed based on co-occurrence, in order to get insights into how this business model pattern is applied in combination with other patterns within the firms we studied.
Top Co-Occurrences
6 pattern co-occurrences
3 pattern co-occurrences
3 pattern co-occurrences