Business models
The razor and blades business model
The razor and blades business model: you sell the first product cheaply and earn on the refills that keep being bought. The first purchase can make little or no profit.
How it makes money
The first purchase can make little or no profit. The money comes from the repeat purchase, which only works with your product.
Real examples
- Gillette sells handles cheaply and earns on blades.
- Nespresso sells machines and earns on capsules.
- Printer makers earn on ink.
The numbers to watch
- Refill purchases per customer
- Profit per refill
- How long customers stay
Who it fits
Products with something that runs out, and a reason to stay with you.
What goes wrong
Cheaper copies of the refill arrive, and customers get annoyed by being locked in.
Try it this week
Ask what your customers buy again and again. It may be the real business.
Then give it a time: one block of 90 minutes this week, in your calendar. Our playbooks have the next steps for finding your first customers.
Questions
What is an example of the razor and blades model?
Gillette sells handles cheaply and earns on blades.
What is the biggest risk with the razor and blades model?
Cheaper copies of the refill arrive, and customers get annoyed by being locked in..
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