Razor-and-Blades Pricing Strategy Explained

The razor-and-blades pricing model is a strategy where a primary product is sold at a low price, or even at a loss, to drive recurring sales of complementary, higher-margin items. This approach is famously associated with products like razors (where the razor is inexpensive, but replacement blades are priced at a premium), printers (low-cost printers with expensive ink cartridges), and gaming consoles (affordable consoles paired with premium games). Also referred to as the “bait-and-hook” strategy, this model hooks customers with the initial product and locks them into a system requiring ongoing purchases.

The key advantage of the razor-and-blades model is its ability to generate a continuous revenue stream from customers after the initial purchase. It is highly effective in industries where customers are likely to make repeat purchases, enabling companies to secure long-term revenue. However, this strategy requires careful balance—the primary product must be affordable enough to attract customers without compromising profitability. Additionally, the recurring purchases must provide sufficient value, as excessively high prices for complementary items can lead to customer dissatisfaction and erode trust.

The razor-and-blades model is most effective in markets with strong customer loyalty, where customers are willing to commit to ongoing purchases of complementary products.

Razor and blade pricing is a strategy where a primary product is sold at a low price, or even at a loss, to drive recurring purchases of complementary, higher-margin items. For example, razors are often inexpensive, but replacement blades are sold at a premium. This model ensures ongoing revenue from repeat purchases.

The razor and bait pricing strategy, also known as the “bait-and-hook” model, involves offering a core product at a low price to attract customers, while charging a premium for the complementary products required for its use. Examples include affordable gaming consoles with high-priced games or low-cost printers with expensive ink cartridges.

The markup on razor blades can be significant, often ranging from 500% to 1,000% of the production cost. Companies use this high markup to recover the initial loss or low profit margin from selling the primary product (the razor) and to ensure long-term profitability through repeat purchases.

Razor blades are expensive due to the razor-and-blades pricing model, where companies offset the low cost of razors with high margins on blades. Additionally, factors such as precision engineering, patented designs, marketing expenses, and customer loyalty programs contribute to their premium pricing.