How a razor revolutionised the way we pay for stuff | BBC News

Two-part pricing is also known as the “razor and blades” model, because that’s where it first drew attention – draw people in with an attractively priced razor, then repeatedly charge them for expensive replacement blades.

Before King Camp Gillette, razors were bigger, chunkier affairs – and a significant enough expense that when the blade got dull, you would sharpen – or “strop” – it, not chuck it away and buy another.

Gillette realised that if he devised a clever holder for the blade, to keep it rigid, he could make the blade much thinner – and hence much cheaper to produce.
He did not immediately hit upon the two-part pricing model, though. Initially, he made both parts expensive.

Gillette’s razor cost $5 (£4) – about a third of the average worker’s weekly wage.

The Gillette razor was so eye-wateringly exorbitant that the 1913 Sears catalogue offered it with an apology that it was not legally allowed to discount the price.

It also included an annoyed-sounding disclaimer: “Gillette safety razors are quoted for the accommodation of some of our customers who want this particular razor. We don’t claim that this razor will give better satisfaction than the lower-priced safety razors quoted on this page.”

The model of cheap razors and expensive blades evolved only later, as Gillette’s patents expired and competitors got in on the act.

Nowadays, two-part pricing is everywhere.

Consider the PlayStation 4.

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How a razor revolutionised the way we pay for stuff – BBC News.