Razor-Razorblade Model

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DEFINITION of 'Razor-Razorblade Model'

A business tactic involving the sale of dependent goods for different prices - one good is sold at a discount, while the second dependent good is sold at a considerably higher price.

BREAKING DOWN 'Razor-Razorblade Model'

If you've ever purchased razors and their replacement blades, you know this business method well. The razors are practically free, but the replacement blades are extremely expensive.

The video game industry is another user of this pricing strategy. They sell the game consoles at a relatively low price, recouping the lost profits on the high-priced games.

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RELATED FAQS
  1. What is the Razor/Razorblade model?

    The Razor/Razorblade business model owes its name to one King Gillette, founder of the eponymous razorblade company. The ... Read Full Answer >>
  2. 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 >>
  3. What are the differences between product bundling and product lines?

    The difference between product bundling and product lines is a product line is a group of related products manufactured by ... Read Full Answer >>
  4. What are some examples of businesses that use market segmentation?

    Numerous types of businesses use market segmentation to optimize their ability to sell to a wide variety of consumers. From ... Read Full Answer >>
  5. What is the difference between the cost of capital and the discount rate?

    The cost of capital refers to the actual cost of financing business activity through either debt or equity capital. The discount ... Read Full Answer >>
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    Transfer pricing involves the trade of goods or services between two related companies, and both can come out the winner. ... Read Full Answer >>

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