Back in the XIXth century, men shaved with razors which required a high skill cap to prevent injuries. Men, therefore, had no other choice but to rely on professional barbers or to buy pretty inconvenient razors for the most reckless ones.
Even if protective devices for safer razors were available around 1870, blades were still being forged and required being sharpened every time they get dulled, which was too often the case.
However, everything changed in 1895, when an American called King Camp Gillette invented a razor with a replaceable blade attachment, which marked the birth of the disposable razor we know today.
At first glance, it seems like a great technological innovation. And it probably is. But the real revolution was definitely not there. In fact, Gillette’s disposable blade laid the first stone of a new business model: the two-part pricing model.
Printers and ink cartridges. Coffee machines and coffee pods from Nespresso. Consoles and video games. Nowadays, the “razor and blades” model is used all around the world, by thousands of companies, generating billions and billions of dollars. A tremendous but also easy to explain success.
First, brands draw people’s attention with a core and lasting element. Sold at an attractive price of course. Then, they make profits by charging users huge fees for every replacement they have to do to keep using the product. For instance, Gillette was losing money when customers were buying its razors for only 0.5$. But it was no longer a problem when they had to spend 1$ for each and every new blade!
And now that a user has his Gillette razor and replacement blades specific to his razor, why would he change? He’ll have to throw away all compatible blades he already bought! Being able to impose such switching costs is like finding the holy grail. And when those costs are strengthened with a glamorous marketing, many users will never bother to change. No matter how high the price could climb.
Apart from that, what we can learn from this story is that research and development clearly appear like a core leverage of Gillette’s innovation. But what turned his invention into a heck of profits was the revenue strategy behind it. So, thinking further than technology and redesigning other strategic elements of their business is something all firms should consider to keep succeeding.
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