Razor and blades business model

The razor and blades business model is a business model wherein one item is sold at a low price (or given away for free) in order to increase sales of a complementary good, such as supplies. For example, inkjet printers require ink cartridges, and game consoles require accessories and software. It is distinct from loss leader marketing and free sample marketing, which do not depend on complementary products or services.

Although the concept and its proverbial example "Give 'em the razor; sell 'em the blades" are widely credited to King Camp Gillette, the inventor of the disposable safety razor and founder of Gillette Safety Razor Company, Gillette did not originate this model.

The urban legend about Gillette is that he realized that a disposable razor blade would not only be convenient, but also generate a continuous revenue stream. To foster that stream, he sold razors at an artificially low price to create the market for the blades. However, in reality Gillette razors were expensive when they were first introduced and the price only went down after his patents expired: it was his competitors who invented the razors-and-blades model.

This model has been used in several businesses for many years. The Gillette company still uses this approach, often sending disposable safety razors in the mail to young men near their 18th birthday, or packaging them as giveaways at public events that Gillette has sponsored.

With a monopoly in the American domestic market, Standard Oil and its owner, John D. Rockefeller, looked to China to expand their business. Representatives of Standard Oil gave away eight million kerosene lamps for free or sold them at greatly reduced prices to increase the demand for kerosene.

Among American businessmen, this gave rise to the catchphrase "Oil for the lamps of China." Alice Tisdale Hobart's novel Oil for the Lamps of China was a fictional treatment of the phenomenon.

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Wikipedia