Razors and Blades

photo credit: Zixii

I own six printers.

I live in a household with two people, my wife and I, we have four computers in use and we own six printers. Six. Three for every person, one and a half for every computer.

The best part is, only one of them is actually in use and, even then, only sparingly.

So why do we own so many printers when the one set up sees less use than a rainmaker in New Orleans? The answer is simple: Cost and the pricing model set up by the manufacturers.

As messed up as this situation is, it isn’t our screwup. Rather, it is the entire printer industry that has created this problem. They’re why I can’t get into my office closet, why I keep finding “printer install” disks every time I look for my Diablo 2 CDs and why I have about a dozen “mystery cords” in my collection of spare parts.

It is time for someone to stand up and fix this. Not only for the sake of sanity, but for the sake of the environment and the people’s whose jobs are being held up by a flimsy business model that blows over in a gentle breeze.

Razors Cut Deep

Getting back to the initial statement, I own six printers because the following story has played out five times:

• The printer I’m using runs out of ink.
• I go to the store to buy more ink.
• At the store, I find that in is insanely expensive, usually $40 or more.
• Then I see another printer on sale, usually for $20 or $30.
• I discover new printer is faster/better than old one.
• I read that it comes with two cartridges.
• I buy new printer.
• I save up to $20.

Now there is absolutely no way this story works in a remotely sane universe. Why on earth would a new printer, complete with all of the gears, electronics and software, cost 50% less than two cartridges? Worse still, why would it be so much less when the printer comes with the same two cartridges sitting on the shelf for twice the price?

This makes absolutely zero sense.

It’s like getting a new car for half the price of a set of tires or getting a new house for half the cost of the windows. You have to move to Bizzaro World for this kind of logic to make sense.

But before you start uttering “Me am Superman” allow me to remind you that this practice is actually insanely common right here on earth. In fact they even have a name for this borderline suicidal business model.

Double Edged Razors

photo credit: Andrew Dyer

As the title of this post suggest, marketers like to call this the “Razor and Blades” model or simply the Razor Blades model for doing business.

The idea is pretty simple. You make a product, say a razor, and sell it dirt cheap, possibly even taking a loss on every one you sell. However, that product has something that wears out or runs out over time, say the razor. You then sell the replacements or additions at a much higher margin, eventually making up for the loss.

This model is used with varying degrees of success across many industries. As the name suggests, the razor industry has used it for decades with great results. Likewise, the video game industry has used it to a small degree, with games being the blades, and even cell phones, with the service contract paying for the virtually free phone.

The theory of the model is actually pretty good, but it has a lot of risks that come with it. After all, if your entire model involves stringing along customers for months and years, there are a lot of ways to go astray.

1. Customer Dissatisfaction: If a customer doesn’t like a loaf of bread, that’s bad news. If the customer doesn’t like that new printer, which you already sold to them at a loss, it is much worse. It’s not enough for customers to use your product, they have to keep using it for years and years to make your money back. If they walk early, you go broke.
2. Bad Pricing: This model promotes price wars on the front end with high markups on the backend. In some cases, as with printers, the price on the front end can drop lower than the replacements on the backend, causing customers to never buy the “blades”.
3. Competition: By marking up the blades, you open yourself up to being undercut on that end. Competitors, theoretically, can easily make and sell cheaper blades since they don’t have to make up for the cost of the razor. Patents, contracts and even copyright law (DMCA Anti-circumvention) can help protect against that, but firing the lawyer gun gets expensive and draining, a cost that must be passed on to consumers who aren’t happy about having alternatives taken away.
4. Innovation: Innovation is murder to this model. If you come out with a new product too quickly, you don’t sell enough blades. You have to release products in cycles to ensure that you get the money you need for the previous release while staying on par with the competition (see the video game industry).
5. Unhappy Customers: Customers, in the long run, don’t like this model and will do everything to undermine it from refilling cartridges to buying games on sale. For every customer who buys the blades at full price, another will find a way to skimp how much they give you.

In short, these models thrive on the few customers that are too rich, too stupid or too lazy to fight against them. This model is also a large part of the reason why many people are upset with modern copyright and patent law as it is used to trap consumers into paying higher prices for something that they need.

It’s a way to legally circumvent free competition and it upsets a lot of people, myself included.

Conclusions

I haven’t bought a printer in approximately eight months. The reason is simple, rather than add another printer to my growing menagerie, I learned that my current one could be refilled very easily. One $20 refill kit later and I’ve been printing happily on the same cartridge for half a year, including at least three refills.

Do I like having to do this? No. But as much of a pain as it is, refilling is both legal and cheap. Though new cartridges make it impossible to refill thanks to software built into the cartridge itself, this one works fine.

Still, I’d gladly pay a few extra bucks to get a bright, shiny and new cartridge for my printer. I’m just not going to pay $40 for the twin pack combo that mine seem to come in.

I really wish companies would just be honest with consumers and not use gimmicks or trickery to lock us in. Of course, as consumers, we only have ourselves to blame.

If we voted with our dollars for companies that charged a fair margin, we would not be in this position. Instead, we’re way too easily lured by a too-good-to-be-true low price and wonder why we pay out the nose later.

We’re suckers. It’s that simple. If we just gained a few IQ points, we might be able to see through it, but we are constantly fooled and that is the only reason many of the businesses that use this model stay in operation.

It seems that we have a whole economy built upon stupidity. Perhaps that might be part of the reason why it is crashing down around us.