Introduction to the Razor and Blade Model
Have you ever noticed how some video game consoles are reasonably priced, but the games for them are quite expensive? Or maybe you’ve seen how some printers are affordable, but the ink cartridges cost a lot? If so, you’ve come across the razor and blade business model. This model is like a strategy in a chess game that companies use to make money.
What Is the Razor and Blade Model?
The name “razor and blade model” comes from the way companies used to sell razors and blades. They would sell the razor (the thing that holds the blade) at a low price or even give it away for free. But, they would sell the blades (the part you need to replace often) at a higher price.
Why would they do that?
It’s because once you have the razor, you need to keep buying their blades. It’s like when you get a new video game console. Once you have the console, you need to buy games to use it. The games are like the blades.
World War I Boost: During World War I, Gillette secured a contract with the U.S. military to supply razors and blades to soldiers. This vastly expanded their customer base, as soldiers returned from the war accustomed to using disposable blades.
How Companies Use This Model
Many companies use this model, not just those selling razors or video games. Printer companies often sell printers at a low cost, knowing that they can make money from selling the expensive ink cartridges. Similarly, mobile phone companies may offer a discounted phone but require a costly service plan.
Why It Works
The razor and blade model works because it makes things seem more affordable. You might not want to buy a video game console if it cost a lot of money all at once. But if you can buy the console at a lower price and then buy games as you can afford them, it seems more manageable.
Plus, once you’ve bought the “razor” (like the console, the printer, or the phone), you’re likely to keep buying the “blades” (the games, the ink, or the service plan). You’ve already made an investment, so you want to keep using it.
Criticism and Legal Battles: Over time, this model has seen its share of criticism and legal battles, particularly in the printer industry. Companies like Epson and HP have faced lawsuits over strategies such as chipping their cartridges to prevent third-party replacements.
When It Doesn’t Work
The razor and blade model doesn’t always work, though. Sometimes, other companies make cheaper “blades” that fit the “razor”. For example, some companies make cheaper ink cartridges that fit popular printers. When this happens, the company that made the printer might not make as much money from selling ink.
Also, if people feel like the blades are too expensive or not good quality, they might stop buying them. They might even switch to a different razor.
Dollar Shave Club's Disruption: In the 2010s, the razor and blade model was disrupted by companies like Dollar Shave Club and Harry's, which offered a subscription model for razors and blades, providing consumers with an affordable and convenient alternative to traditional retail models.
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The Impact of the Razor and Blade Model
So what does this all mean for you? Well, it helps to be aware of this model when you’re buying things. It’s important to think about not just the cost of the “razor,” but also the cost of the “blades” you’ll need to keep buying.
Conclusion: A Smart Strategy
The razor and blade model is a smart strategy that companies use to attract customers and make money over time. As a savvy shopper, understanding this model can help you make smarter decisions and get the most out of your purchases. So next time you see a deal that looks too good to be true, remember the razor and blade model. It might just save you money in the long run.
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