Razor-Razorblade Model

What is the 'Razor-Razorblade Model'

The razor-razorblade model is 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.

RELATED TERMS
  1. Loss Leader Strategy

    A business strategy in which a business offers a product or service ...
  2. Gaming Industry ETF

    A sector exchange-traded fund that invests solely in gaming companies, ...
  3. Tactical Trading

    A style of investing for the relatively short term based on anticipated ...
  4. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s ...
  5. Volume Discount

    A financial incentive for individuals or businesses that purchase ...
  6. Accrued Market Discount

    The gain in the value of a discount bond expected from holding ...
Related Articles
  1. Fundamental Analysis

    Is Gillette's Market Edge Becoming Razor-Thin?

    Despite Gillette's success with the razor-and-blades strategy, the increasing popularity of beards and new competition may slow the brand's growth.
  2. Retirement

    Harry's Review: Is It Worth It?

    Find out if Harry's, the fast-growing, online purveyor of low-cost razor blades and shaving kits, is worth all of the hype in this review.
  3. Investing

    How To Game The Video Game Industry

    Investopedia explores the business, current developments, future trends of video games industry and how the overall industry makes money.
  4. Investing

    You Love Video Games, But Do You Know How The Industry Works?

    Traditionally, the video game industry was limited to consoles, such as Microsoft’s (MSFT) Xbox and Sony’s (SNE) PlayStation, but it now includes PC games, mobile games and, in the near future, ...
  5. Investing News

    How Dollar Shave Club Grew to a 630M Valuation

    Dollar Shave Club's rapid rise to become a major player in the razor industry.
  6. Investing

    How The Video Game Industry Is Changing

    Video game creation has become increasingly complex, and the cost of creating a game to run on one of the major consoles has risen with this greater complexity.
  7. Retirement

    Dollar Shave Club Review: Is It Worth It?

    Learn about the business model of the Dollar Shave Club, and find out whether the razor subscription company is a worthwhile investment.
  8. Fundamental Analysis

    The 6 Most Famous Failed Video Game Makers (KING, ZNGA)

    The video-game industry pulls in $100 billion in revenue annually. Failed companies offer a cautionary tale.
  9. Fundamental Analysis

    The Economics of Gaming Consoles

    Gaming consoles are sold at a loss or minimal profit to boost their sales. Companies make money on each game sold.
  10. Investing Basics

    Can Games Make You A Better Investor?

    As investing is a great example of an activity that draws on a wide range of mental and emotional skills, it is worth exploring how to improve this skill set.
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 Answer >>
  2. What are the differences between operating expenses and cost of goods sold (COGS)?

    Discover the differences between operating expenses and cost of goods sold, how each are calculated and why they are considered ... Read Answer >>
  3. What's the difference between cost of goods sold (COGS) and cost of sales?

    Explore the difference between the cost of goods sold and cost of sales listed on an income statement, and what types of ... Read Answer >>
  4. What do you need to know to create a business model?

    Learn what a business model is, its importance and the primary elements that are needed in order to create a successful business ... Read Answer >>
  5. What is the difference between a capital good and a consumer good?

    Learn to differentiate between capital goods and consumer goods, and see why capital goods require savings and investment ... Read Answer >>
  6. What is the point of developing a business model?

    Learn some of the benefits of developing a business model and how business models are used. Consider an example of business ... Read Answer >>
Hot Definitions
  1. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  2. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  3. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  4. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  5. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
  6. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
Trading Center