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.

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

    Proctor & Gamble (PG) is a multinational consumer goods company that was founded in 1837. The company has five revenue ... Read Full Answer >>
  2. Is a financial advisor allowed to pay a referral fee?

    A financial advisor is allowed to pay a referral fee to a third party for soliciting clients. However, the Securities and ... Read Full Answer >>
  3. How has Google's operations strayed from its original mission statement?

    Google's (GOOG) mission statement has been the same since its inception in 1998: "Organize the world's information and make ... Read Full Answer >>
  4. How does a long tail become profitable?

    A long tail becomes profitable because the costs to produce, market and distribute a product or service in a niche are low, ... Read Full Answer >>
  5. How do companies with a large product portfolio use BCG Analysis?

    BCG analysis is used to evaluate an organization's product portfolio in sales planning and marketing. It is specifically ... Read Full Answer >>
  6. What are the similarities between product differentiation and product positioning?

    Product differentiation and product positioning are important elements in a marketing plan, and most marketing strategies ... Read Full Answer >>
Related Articles
  1. Entrepreneurship

    3 Ways You Can Support Small Business Growth

    Discover a number of different options available to support small business growth, including crowdfunding campaigns and shopping locally.
  2. Stock Analysis

    Southwest Vs. Virgin Vs. JetBlue: Comparing Business Models

    Compare and contrast the business strategies and philosophies of three anti-establishment U.S. airlines: Southwest Airlines, Virgin America and JetBlue.
  3. Professionals

    Advisors: Do You Need to Tweak Your Marketing?

    Advisors use a variety of marketing techniques to attract clients, but they don't all work. It may be time to evaluate what is, and isn't, successful.
  4. Entrepreneurship

    10 Ways to Be a Successful Entrepreneur

    Are you hoping to launch your own business and work for yourself? If so, here are the top 10 tips for entrepreneurs.
  5. Stock Analysis

    Are the Brands Millennials Love a Good Buy?

    Millennials make up a very big — and thus important —c onsumer generation. So if they love a brand, its stock is likely to outperform, right?
  6. Entrepreneurship

    10 Ways You Can Make Money as a Blogger

    Obtain helpful information about the top 10 techniques that professional bloggers utilize to generate their incomes from blogging.
  7. Investing

    Expedia's New Buy Could be a Game Changer for Airbnb

    As P2P platforms revolutionize the hotel industry, older players must evolve to compete.
  8. Investing

    Protect Your Creations--Register Your Trademark

    Federally registering your brand name or logo offers the broadest protection against potential trademark infringement.
  9. Investing Basics

    Should You Get A Six Sigma Black Belt? Average Salary: 98K

    Interested in the Six Sigma Black Belt but unsure whether you need one? Here's a guide to it and how it differs from other belts.
  10. Economics

    Understanding Electronic Commerce

    Electronic commerce is the buying and selling of goods and services over an electronic network.
  1. Brand Identity

    Brand identity is the way a business wants consumers to perceive ...
  2. Trademark

    A recognizable insignia, phrase or other symbol that denotes ...
  3. Brand

    A distinguishing symbol, mark, logo, name, word, sentence or ...
  4. Cost Test

    A standard test applied to a process to determine if the net ...
  5. Negative Option Deals

    A dubious business practice that involves supplying a typically ...
  6. Path To Profitability (P2P)

    A clearly defined route to profitability as described in a business ...

You May Also Like

Hot Definitions
  1. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  2. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  3. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
  4. Black Monday

    October 19, 1987, when the Dow Jones Industrial Average (DJIA) lost almost 22% in a single day. That event marked the beginning ...
  5. Monetary Policy

    Monetary policy is the actions of a central bank, currency board or other regulatory committee that determine the size and ...
  6. Indemnity

    Indemnity is compensation for damages or loss. Indemnity in the legal sense may also refer to an exemption from liability ...
Trading Center