Razor and blades business model

The razor and blades business model (also called the "bait and hook model" or the "tied products model") works by selling a "master" product at a subsidised price, and making the profit on high margin "consumables" that are essential to the use of the master product. The master product may actually be sold at a loss, in order to "capture" the customer into using the consumable product.

In effect, this is the same as offering a high-interest loan to the customer to offset the price of the master product, which is to be paid off in installments as they use the consumables.

This business model can be dated to King C. Gillette, who used this business model for his sales of razor handles and disposable razor blades[?]. This business model continues to be used in the disposable razor blade business to this day.

In markets where all the major competitors follow this business model, there may be suspicions of the existence of cartels and violation of antitrust legistation.

Other examples include:

• computer printers and their ink cartridges
• games consoles and the games they play
• cell phones and air time costs
• inexpensive cameras and prints

see also: business model, strategic management, marketing

List of Marketing Topics	List of Management Topics
List of Economics Topics	List of Accounting Topics
List of Finance Topics	List of Economists