#129 Razor and Blade

Definition:The razor and blade business model, often referred to as the "razor/blade model," is a pricing strategy where a company sells a product at a low or even a loss-leading price (the "razor") to attract customers, with the expectation of making a profit over time by selling complementary or consumable products or services (the "blade") that are required for the continued use or maintenance of the initial product. The initial product serves as a platform to create an ongoing revenue stream through the sale of related items.
History:The razor and blade business model got its name from the razor industry but has since been applied to various other industries. Here's a brief history:
Gillette: The concept of the razor and blade model is often attributed to King C. Gillette, the founder of the Gillette Company. In 1903, Gillette introduced the safety razor, which was sold at a low cost. The company made significant profits by selling replacement razor blades, which required frequent replacement.
Automobile Industry: Automakers have employed a similar model by selling cars (the "razors") and making ongoing profits from replacement parts, accessories, maintenance services, and financing (the "blades").
Printers and Ink Cartridges: Printer manufacturers often sell printers at relatively low prices and generate revenue through the sale of ink cartridges, which need frequent replacement. This is a classic example of the razor and blade model.
Video Game Consoles: Companies like Sony and Microsoft have adopted this model by selling gaming consoles (razors) and earning revenue through the sale of video games, accessories, online subscriptions, and downloadable content (blades).

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