Overview
The razor-and-blades model sells a core product at low margin (or a loss) to lock customers into a stream of high-margin consumables or refills that only work with it. The printer is cheap; the ink is not. The console is subsidised; the games are where the profit lives.
It works by separating the one-time purchase from the recurring one and capturing value on the recurring side. The moat is compatibility: once you own the razor, you must buy that maker's blades.
How it works
Sell the durable base product cheaply to maximise adoption.
Design it to require proprietary consumables or add-ons.
Earn recurring, high-margin revenue on the refills over the product's life.
Where you see it
Printers & ink
Cheap printer, expensive proprietary cartridges.
Consoles & games
Subsidised hardware, profit on software and accessories.
When it works
- The consumable is proprietary and repeatedly needed.
- Customers can't easily get compatible refills elsewhere.
- The lifetime consumable revenue exceeds the base-product subsidy.
When it fails
- Third parties sell compatible consumables cheaper, breaking the lock-in.
- Customers resent the markup and switch at the next purchase.
- The base product lasts so long the consumable stream dries up.
Frequently asked questions
Why sell the base product at a loss?
To maximise the installed base, because each device sold commits a customer to a stream of high-margin consumables that more than repays the subsidy over time.
What breaks this model?
Compatible third-party consumables. Once customers can buy cheaper refills that work, the lock-in — and the margin — collapses.