Razor-Razorblade

First one is on the house
Background

Hook up the customers

The razorblade business model has gotten its name from how Gillette sells razors for modest prices and, later, the consumable blades with substantially higher margins. Companies might even sell the initial product at a loss to get customers hooked because they know that the components, consumables, upgrades, or services most often far exceed this loss over time.

Rough competition

The razorblade model is not that common in the consumer packaged goods space today thanks to the fast-paced copycat nature and low switching associated with changing brands, but even more common in industries with high barriers to entry and/or high switching costs.

Wide range of products and services

Some examples of products using this model are continuous glucose monitoring sensors used by diabetics, gaming consoles, mining drill rigs and excavators, printers, and lab testing machines. Arguably, modern SaaS companies are utilizing this model as well in a way, with the common land-and-expand strategy based on add-on sales.