Razor - Razorblade Model

Razor - Razorblade Model

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.

Notes:

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.

See also: Eating Someone's Lunch, Loss Leader, Porter's 5 Forces