What is the Razor/Razorblade model?

By Justin Bynum AAA
A:

The Razor/Razorblade business model owes its name to one King Gillette, founder of the eponymous razorblade company. The story goes that Gillette's idea for creating disposable razors stemmed from his personal experience with a straight razor so worn it was rendered useless. Gillette reasoned - and rightly so - that if he could offer consumers a sturdy, permanent razor supplemented by cheap, easily replaceable blades, he could corner the men's facial grooming market and create a massive, repeat customer base.

In modern times, the Razor/Razorblade model has evolved to mean any business practice in which a company offers a one-time product - usually at little or no cost (see loss leader) - that is complemented by another product for which the consumer is required to make repeated purchases. Perhaps the most recent contemporary example of this practice involves cable companies giving away DVR devices to customers and then charging those customers monthly subscription fees to use the DVRs.

However, a company need not give away products to adhere to the Razor/Razorblade model. For example, during the first few years of manufacturing "Next Generation" video game consoles, both Sony and Microsoft would sell their products at a significant loss. They then would make up for these losses by offering online gaming subscriptions and software licensing agreements. In this way, the two companies still managed to exploit the Razor/Razorblade model - generating profits from loyal, repeat consumers.

This question was answered by Justin Bynum.

RELATED FAQS

  1. Who are Proctor & Gamble's (PG) main competitors?

    Learn about Procter & Gamble's major competitors in each of its revenue segments, including fabric care and home care, and ...
  2. What are the elements of an effective value proposition?

    Learn what a unique value proposition is, and understand all of the elements that a company must include in constructing ...
  3. What is Jeff Weiner's personal business philosophy?

    Drive business success by focusing on your company's core strengths and bringing value to customers, according to LinkedIn ...
  4. What are the four types of economic utility?

    Understand the four main types of economic utility that apply to transactions between consumers and businesses: form, time, ...
RELATED TERMS
  1. Mobile Advertising

    Mobile advertising is a method of advertising that appears on ...
  2. Mobile Marketing

    Mobile marketing is marketing that takes place via mobile devices ...
  3. Mobile First Strategy

    Mobile first strategy is trend in website development where designing ...
  4. Direct Mail

    A credit card offer targeted at a specific consumer and sent ...
  5. Online-To-Offline Commerce

    A business strategy that draws potential customers from online ...
  6. Protected Cell Company (PCC)

    A corporate structure in which a single legal entity is comprised ...

You May Also Like

Related Articles
  1. Investing Basics

    Who are Proctor & Gamble's (PG) main ...

  2. Personal Finance

    How Youtube Ad Revenue Works

  3. Entrepreneurship

    Taboola: How "Content You May Like" ...

  4. Professionals

    What is Tim Cook's managerial style?

  5. Investing News

    Facebook Money Transfer: Transforming ...

Trading Center