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From razors and blades to printers and ink cartridges to smartphones and monthly usage charges to media devices and content, razor-and-blades pricing is commonplace. The argument for such a business model is compelling: entice consumers to adopt with a low initial price for the ‘razor,’ build up an installed base, and more than make up for the initial subsidy by charging a high price for replacement ‘blades.’ The problem is, many consumer enticement, customer lock-in, and competitive lock-out mechanisms look less and less tenable given modern-day developments such as the Internet, Google searches, social media, the hacker revolution, the ‘maker movement,’ rapidly improving technology, leaky supply chains, and global markets. This article characterizes the what, why, and how of razor-and-blades pricing; then examines the present-day tenability of such a pricing practice; and concludes with an impetus and a call for innovation—innovation in, perhaps, the pricing of and the purchasing arrangement for the initial razor; the value proposition from the razor and the razor-and-blades system; the architecture of the razor-and-blades system; and the delivery, especially in terms of customer experience, of value from the razor-and-blades system.
Often, new management frameworks, tools, and ways of doing things enter the practitioner space, gain acceptance and ever-wider adoption, and become integral to business models and processes. Meanwhile, the world changes. Therefore, every now and then it is useful to step back and ask if the tried-and-true frameworks, tools, processes, and practices are as relevant today as they were when they were first conceived and adopted. Razorand-blades pricing is a case in point. There were–—and still are–—good reasons in support of razor-and-blades pricing. But here, too, the world has changed–—especially given the advent of the Internet, the widespread adoption of social media, more informed and much-advised customers, the popularity of open standards and the growth of the maker movement, disparities among societies regarding respect of intellectual property rights, and long and information-leaking supply chains. These are but a few developments that call into question the present-day tenability of razor-andblades pricing. What is clear is that while reports of razor-andblades pricing’s death may be exaggerated, there clearly is a case for revisiting the model. This article does that. It outlines the what, why, and how of razor-and-blades pricing; it questions the presentday tenability of razor-and-blades pricing; and it suggests the impetus for innovative alternatives to razor-and-blades pricing by suggesting new pricing models and purchasing arrangements, value-proposition redefinition, rethinking productcomplementary product system architecture, and redefinition of value delivery.