razorblade model

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A business model which involves selling an item at a low price, sometimes even at a loss, in order to sell complementary or consumable products later. The name refers to the original use by the Gillette Company to sell hand-held razors at cost and then make a high margin of profit by selling the blades. Another, more modern example can be found in the printer business, where the actual printers are sold cheaply in order to sell very high margin cartridges to consumers. Often the higher margin item sold is a service, such as in the mobile phone industry where carriers require the continued use of their network, generating repeat revenue in that way.

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