How they do it: The Sega Dreamcast was launched in 1999 for the price of $199, and video games for the Dreamcast were sold for $50-$70. With any customer owning on average multiple games, this resulted in recurring add-on revenues for Sega. These recurring sales of video games were cross-financing the cost of the hardware.
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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.
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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.
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How they do it: Although the iPod 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.
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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.
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