Archive for October 24th, 2014

October 24, 2014

Give ’em the razor; sell ’em the blades

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Freebie marketing, also known as the ‘razor and blades’ business model, is a business model wherein one item is sold at a low price (or given away for free) in order to increase sales of a complementary good, such as supplies. For example, inkjet printers require ink cartridges, ‘Swiffers’ require cloths and cleaning fluid, mobile phones require service contracts, and game consoles require accessories and software. It is distinct from a loss leader (an inexpensive product sold at a loss to stimulate sales of more profitable ones) and free sample marketing, which do not depend on complementarity of products or services.

Although the concept and its proverbial example ‘Give ’em the razor; sell ’em the blades’ are widely credited to King Camp Gillette, the inventor of the disposable safety razor, he did not originate this model. The usual story about Gillette is that he realized that a disposable blade would not only be convenient, but also generate a continuous revenue stream. To foster that stream, he sold razors at an artificially low price to create the market for the blades. However, Gillette razors were expensive when they were first introduced, and the price only went down after his 1901 patent expired: it was his competitors who invented the razors-and-blades model.

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