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Encyclopedia > 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. A business model (also called a business design) is the mechanism by which a business intends to generate revenue and profits. ... Profit is a positive return made on an investment by an individual or by business operations. ... The term margin has many meanings: In telecommunication, margin has the following meanings: In communications systems, the maximum degree of signal distortion that can be tolerated without affecting the restitution, without its being interpreted incorrectly by the decision circuit. ...

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 it 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 2004, The Gillette Company expanded this business model with the M3Power, a vibrating safety razor with both replaceable blades and batteries. Gillette owns the Duracell battery brand, allowing them to make money selling not only blades but also replacement batteries. King Camp Gillette (January 5, 1855–July 9, 1932) developed and patented a type of safety razor. ... A razor is an edge tool (primarily, used in shaving). ... 2004 (MMIV) was a leap year starting on Thursday of the Gregorian calendar. ... The Gillette brand logo The Gillette Company (NYSE: G) was founded by King C. Gillette in 1901 as a safety razor manufacturer. ... Duracell AA batteries. ...

This model may be threatened if the price of the high margin consumables is in question. For example, computer printer manufacturers have gone through extensive efforts to make sure that inkjet printers are not compatible with cheaper aftermarket ink cartridges, such as designing the cartridges in a way that makes it possible to patent certain parts or aspects, or invoking the Digital Millennium Copyright Act. In Lexmark v. Static Control the U.S. Supreme Court ruled that circumvention of Lexmark's ink cartridge lock does not violate the DMCA. On the other hand, in August 2005, Lexmark won a case in the U.S. that allows them to sue certain large customers for violating their boxwrap license. Or consumers may find other uses for the subsidised product and not utilize it for the company's intended revenue stream. This has happened to "free" personal computers with expensive proprietary internet service, as well as contributing to the spectacular failure of the CueCat barcode scanner. A patent is a set of exclusive rights granted by a state to a person for a fixed period of time in exchange for the regulated, public disclosure of certain details of a device, method, process or composition of matter (substance) (known as an invention) which is new, inventive, and... The Digital Millennium Copyright Act (DMCA) is a United States copyright law. ... Supreme Court of the United States ruled that circumvention of Lexmarks ink cartridge lock does not violate the Digital Millennium Copyright Act. ... Lexmark is an American computer printer corporation. ... CueCat barcode scanner The correct title of this article is :CueCat. ...

In markets where all the major competitors follow this business model, there may be suspicions of the existence of cartels and violation of antitrust legislation. In some cases, notably auto parts in the United States, legislation exists specifically to prevent this business model from existing. A cartel is a group of legally independent producers whose goal it is to fix prices, limit supplies and limit competition. ... Antitrust or competition laws are laws which seek to promote economic and business competition by prohibiting anti-competitive behavior and unfair business practices. ...

Examples include

Electric toothbrush An electric toothbrush is a toothbrush that uses electric power to move the brush head. ... To meet Wikipedias quality standards, this article or section may require cleanup. ... An ink is a liquid containing various pigments and/or dyes used for colouring a surface to render an image or text. ... The Nintendo GameCube is an example of a popular video game console. ... Xbox 360 Xbox 360 is the successor to Microsofts original Xbox. ... Motorola T2288 mobile phone A mobile phone is a portable electronic device which behaves as a normal telephone whilst being able to move over a wide area (compare cordless phone which acts as a telephone only within a limited range). ... A camera is a device used to take pictures (usually photographs), either singly or in sequence, with or without sound recording, such as with video cameras. ... Satellite television is television delivered by way of orbiting communications satellites located 37,000 km (22,300 miles) above the earths surface. ... A mop in a bucket with a wringer. ... A glucose meter (or glucometer) is a medical device for determining the approximate amount of glucose in a drop of blood obtained by pricking the skin with a lancet. ...

See also

  Results from FactBites:
UK Razor - Free UK Delivery on many items (565 words)
A razor is most commonly used by men to shave their facial hair and by women to shave their leg hair and/or pubic hair.
A potato peeler is a metal blade attached to a metal, plastic or wooden handle that is used for peeling vegetables, usually potatoes.
Razor wire is a mesh of metal strips with sharp edges whose purpose it is to prevent passage by human beings.
KPOWEB (309 words)
Razor and blades business model is one of the most widely used marketing model by the FMCG firms.
This business model can be dated to King C. Gillette, who used it 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.
  More results at FactBites »



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