One irritated salesperson became so tired of this time-consuming process that he wondered, What if we had detachable blades that could be used once and then discarded?This man was none other than Mr. King Gillette himself.He got his razor and blade patent and enjoyed being the leader for a decade, but when the patent expired, the Gillette company faced a 20% decline in sales.Thatu2019s when the introduction of the razor blade model came along and changed the entire industry forever.The razor blade model means selling the base product (the razor), which is a durable product, at cost or even at a loss, and selling the paired proprietary consumable goods (the blades) at a higher profit margin.The sales of Gillette skyrocketed by 127% in the next year by using this pricing model.
There are a lot of companies that are using this model. Sony makes a loss of $60, or Rs. 4200, on each PlayStation console sold. But you earn high-profit margins from selling CDs and subscriptions.Amazon Kindle sells the device at a loss and profits from ebook sales. Kodak made money by selling films and cameras at low prices.In the digital market, this model has evolved into a freemium model, wherein the user can use your base product for free, but to get premium features, one needs to upgrade to the paid version.
Have you heard of this model before? Comment below if you know more about it.
