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May 31Doug Smith

Buzzword of the Week: The Razor-Razorblade Model

May 31Doug Smith

According to Investopedia, The Razor-Razorblade Model is a business tactic involving the sale of dependent goods for different prices – one good is sold at a discount, while the second dependent good is sold at a considerably higher price.

If you’ve ever purchased razors and their replacement blades, you know this business method well. The razors are practically free, but the replacement blades are extremely expensive.

The video game industry is another user of this pricing strategy. They sell the game consoles at a relatively low price, recouping the lost profits on the high-priced games.

Another excellent example is the cell phone industry, where carriers will give away cell phones for free, then charge a high recurring monthly fee for cell phone service.

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