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    #1

    razor-and-razor-blades model

    What does the following model mean? Of course, I know what "razor" and "razor blades" are.

    This book posits the theory that free stuff---whether pirated, part of a marketing budget or given away by businesses or creators---is the starting point in a relationship with customers or audiences. It doesn't even have to be free: Nespresso coffee machines...... are all sold at low or negative margins..... While the razor-and-razor-blades model is long established, this book argues that most companies don't go far enough in understanding their audience and focusing on moving low-spending customers along the demand curve...

    Thank you.

  1. MikeNewYork's Avatar
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    #2

    Re: razor-and-razor-blades model

    Quote Originally Posted by unpakwon View Post
    What does the following model mean? Of course, I know what "razor" and "razor blades" are.

    This book posits the theory that free stuff---whether pirated, part of a marketing budget or given away by businesses or creators---is the starting point in a relationship with customers or audiences. It doesn't even have to be free: Nespresso coffee machines...... are all sold at low or negative margins..... While the razor-and-razor-blades model is long established, this book argues that most companies don't go far enough in understanding their audience and focusing on moving low-spending customers along the demand curve...

    Thank you.
    For many years, razor blade companies have given away razors for free or sold them at a very discounted price. They do this because the customer then has to buy their blades/cartridges. They make their profit on the blades/cartridges. This was so commonplace, it became a business model.

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    #3

    Re: razor-and-razor-blades model

    You lose money by "giving away" the capital equipment, but make it up (and profit) by locking in the customer to purchasing the consumable supplies from you.

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