The razor and blade strategy is still here.
Associated with King Gillette (King was really his first name), it referred to cheap razors and expensive blades. When it works, you sell your product as a loss leader and then make money on its complements.
Our story starts two years ago when (then) Attorney General Loretta Lynch said the Justice Department was giving body cameras to 20 police departments. The goal? To study the camera’s impact and encourage its use.
Fast forwarding to now, the Axon Company (previously known as Taser International) has taken the leap from the 20 department offer to all police. In a “free” yearlong trial, any department can get body cameras for every police officer. The icing on the cake? Data storage and technology are included.
Accustomed to Axon, at year’s end you will probably become a paying customer. You just need to negotiate a price for the equipment (according to their website).
The catch? You have to use Axon’s data storage for approximately $50 to $100 per officer per month,
Our Bottom Line: Complementary Products
The razor and blade strategy is all about how complementary products increase demand. When the first item becomes more popular, then buyers have to purchase more of its complement.
With the body cameras, equipment and data storage are initially free. Afterwards, Axon (I assume) will charge a relatively low price for the cameras. Their big dollars come from the complement–the data storage and management.
To display the wonder of the razor and blade strategy, our first graph shows an increase in supply that makes price plunge. Then, when thousand of officers have the cameras, their demand for the complementary product, the data storage, spikes:
Offering economic insight, one of Axon’s competitors said, “You know there’s no such thing as free…”
And certainly not the “blade” when you own the “razor.”
Several sentences from this post were previously published at econlife.