← Business Models: Core (all topics)
Razor-and-blades (installed base & consumables)
What it is
Placing the equipment cheaply, free or on loan, then earning from the consumables it requires. A diagnostics analyser is installed at a laboratory against a reagent commitment; a printer is sold at low margin and the ink recovers it; a machine tool earns through carbide inserts; a genset through spares and service
The economics sit in the annuity, not the equipment, so placement is a customer-acquisition cost rather than a sale
Impact on industries
- Converts a lumpy capital sale into a recurring, high-margin consumable stream that continues for the asset's working life
- The installed base is the moat - once the equipment is placed, the customer buys the matching consumable because switching means replacing the machine
- Capital is committed upfront against an annuity that only pays back over years, so growth consumes cash and depends on customer retention
- Third-party and refilled consumables attack the annuity, which is why compatibility and warranty are defended aggressively