The Bait and Hook business model is one of the most well-known business models, and is often described as the Razor Blade model in reference to one of its leading examples. In more generic terms it is also quoted to as the Tied Products/Service business model. In essence the model consists of offering a basic product or service at a very low price (the bait), and then taking profit on recurrent sales of refills or associated products or services (the hook).
The first example that comes to mind is companies like P&G (Gillette) selling their razors at low cost and earning money on the recurrent sales of the blades. Over the years the concept has been successfully copied to other industries, with leading examples like printers (the bait) and inkjet cartridges/refills (the hook); and cell phones (the bait) and air time (the hook). The video gaming industry shows another good example. The game consoles are sold at relatively low price, recouping the lost profits on the higher priced games.
- Business Models