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Razor and blades business model
Razor and blades business model is one of the most widely used marketing model by the FMCG firms. Razor and blades business model is also called "bait and hook model" or the "tied products model."
In this kind of marketing model, the product can be divided into two parts. One that is the master product part and the other is the consumable part that is to be used in conjunction with the master product. Master product is seldom sold as bait that is at a lower rate to attract more customers.
In effect, this is the same as offering a high-interest loan to the customer to offset the price of the master product, which is to be paid off in installments as they use the consumables.
This business model can be dated to King C. Gillette, who used it for his sales of razor handles and disposable razor blades. This business model continues to be used in the disposable razor blade business to this day.
In 2004, The Gillette Company expanded this business model with the M3Power, a vibrating safety razor with both replaceable blades and batteries. Gillette owns the Duracell battery brand, allowing them to make money selling not only blades but also replacement batteries.
This business model is effective if the company manufacturing the master product also produces that consumable and there are no alternative to the consumable. For example, all the vehicles run on petrol or diesel so no specific car maker can use this strategy to market his car as there are a number of fuel suppliers in the market.