BMI's 55 Pattern Cards: Razor and Blade

Pattern Description:

The basic product is cheap or given away for free. The consumables needed to operate it, on the other hand, are expensive and sold at high margins. The initial product price lowers the customer's entry barrier, while the subsequent recurring sales finance the up-front discount. Usually, these products are locked to a proprietary technology, further enhancing a customer's dependency on the product.

Fun fact:

Dates back to Gillette’s 1904 move to give the base product (the razor) away at a low price, earning money through higher-priced consumables (the blades).

Case study:

Nestlé Nespresso (with a little help from George Clooney) made single-use coffee capsules cool. Accept no substitutes: Today, there are many knock-off and store-brand capsule espresso machines, but it's Nespresso that makes the market. A basic machine costs around $150, but a 50-pack of capsules (one per cup) will run upwards of $40. Fifty cups at one or two shots a day – it adds up.