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. Investopedia Says:
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. Related Terms:
Eating Someone's Lunch
Loss Leader
Porter's 5 Forces |