Have you ever gotten a free razor in the mail? You know, when Gillete or Schick releases a new razor, does one magically appear in your mailbox? I’ve gotten several free razors over the years. Have you ever wondered why they gave you a razor for free? The razor is just the way that you get hooked into buying the company’s more profitable products (the blades). The concept of giving something away at a loss in hopes to hook them is nothing new and this scenario is known as a loss leader. Sometimes it takes guts to run with a loss leader campaign but at the end of the day, it’s smart business… sell the razor blades, not the razor.
This has to be one of the best stories and concepts I’ve heard in a while…sell the razor blades, not the razor. It’s one of those common sense type stories that you might not think about on a day-to-day basis, but when it hits you, you get the ah-hah moment complete with the brightly lit bulb.
I can’t remember where exactly I read about the razor vs. razor blade concept but I do know that the article involved Robert Mondavi, and him teaching his son the concept. Think about all the industries that take advantage of this scenario. For example, Expedia takes guest rooms provided by hotels at a discount, marks them up, and sells them for a profit. Generally speaking, their markups are usually around $20+ a night. Hotels sell them rooms simply because of their large distribution channels and guests book through them because they generally end up with a cheaper rate than booking directly with hotels. $20 gross profit per room + thousands of properties, thousands of interested guests, multiple night stays, you’re beginning to see the power of the model. They don’t have to deal with guest check-ins, housekeeping, room maintenance, etc. because that would be the razor. Instead, they use their distribution services to sell the blades and let the hotels do the work. Granted their net operating margin declined in 2010 something like 8.5%, their high volume of sales produces quite a bit of money. Quite an effective example of being a middle man if you ask me.
Do you have any other examples you want to share about selling razor blades instead of razors?
by Prashant on May 8, 2010
in Success
I have no idea where I read/heard this quote from but I had this written down in one of my notebooks from a couple years ago so I thought I’d share with you. Garrison Keillor says, “Be well, do good work, keep in touch” which I think is a truly epic quote because it hits three major areas of being a successful.
Be well
Being well has to deal with staying healthy. If you are sick all the time, you can’t be as useful as if you weren’t sick…pretty straight forward right? Hit the gym, up your vitamin-c intake, whatever you need to do to stay healthy and productive. It’s also important that you don’t get burnt out because you try to take on more things than you can handle. Reduce your work load, learn the art of delegation, set a schedule and stick to it. Reducing stress is vital to long-term health for you and your business’s success.
Do good work
This is an area that I can’t stress enough…do good work. I’m a big believer in the concept of if you’re going to do something, you better do it right or not do it at all. Granted, sometimes there may be special situations where you have constraints such as the luxury of time. But besides those instances, don’t involve yourself with monkey business, half-assery, or BS. If you need me to put it another way: stop chasing every opportunity… quality over quantity.
Keep in touch
Stay in touch with your customers. Learn what their problems are and try to solve them. I think this is an area that a lot of people don’t take advantage of (myself to some degree) but it really is important to stay in touch. An example of a contact schedule of this for web designers might look something like something like this:
- During the initial contract process, keep your client updated about revisions, the status of the project, any potential delays, etc.
- After the project has been completed, make sure you get feedback about the project, how they liked working with you, how you could improve, etc.
- A few months down the road, make sure you do an audit on the website and let the client know about any trends you notice, revisions that could be made, etc. I personally search through client’s analytics data and browse the long-tail for new content creation suggestions on a quarterly basis.
The bottom line is that by being well, doing good work, and keeping in touch, you will keeps your clients happy, build creditability, and make clients feel reassured that they made the right decision in working with you. Unless you’re only after a short-term relationship with your client, keeping in touch will allow you to build long-lasting relationships for future work and referral business. After all, we all know how powerful word-of-mouth can be!
