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Frugal Move: Sidestep “Razor Blade” Business Models

In business, the more that’s known about the person on the other side of the deal, the better the chances of success. Corporations have this figured out. They spend vast resources to learn what motivates the likes of you and me to buy. This research gives them a huge advantage in making sales.

Marketers know that buyers love bargains. Low prices attract attention. Shoppers get a warm and fuzzy feeling inside whenever they think they’ve spotted a great deal. Marketers exploit our emotions about pricing. To close sales, they persuade us that we’re buying at a low, low price—even if we’re not.

The “razor blade” business model seizes upon our desire for big savings. With this tactic, sellers offer products at incredibly low prices in order to lure us into making later purchases of related items. Naturally, these related items produce much larger profits. The shaving industry provides a classic example. In a seeming act of corporate largesse, Gillette or Schick sells you an inexpensive razor. Perhaps they even give you one for free. This acquisition lures you into buying the blade refills, which deliver enormous profits. So for sellers, the real money isn’t in the razors themselves—it’s in the razor blades.

Our economy overflows with examples of razor blade marketing. You get a low price on a computer printer, but you pay a premium when you refill toner cartridges. You buy a video game console for cheap, but discover later that the games are hideously expensive. You purchase a home soda system, but afterwards you find out that syrup and CO2 cost much more than colas at Costco. You pick up a cheap sweeper to collect stray dust bunnies (“hey look, it swivels!“) and then you shell out big dollars for disposable refills. In each instance, the seller hooks you with a low-priced purchase and then enjoys years of steady returns as you’re caught up in its product line.

So how can consumers counteract these seemingly irresistible razor blade offers? When faced with such sharp tactics, how can we avoid a death by a thousand cuts?

The pernicious problem here is that our spending rarely reflects an act of cold calculation. All too often, it’s an emotional behavior. As a result, we’re exposed to manipulations by marketers. We see what looks like a great offer. We more or less pounce on it, and in the process we’re pounced upon.

To combat marketers, we need to remove ourselves from the realm of the emotional. Sellers calculate coldly when they sell; we in turn should calculate coldly when we buy. If marketers go all Spock on us, we should go all Spock on them. We can then direct our emotions to other realms where they truly belong: extending kindnesses to others, giving generously to charities, or bewailing Peyton Manning’s lack of pass protection.

I don’t place much credence in consumer education. It’s a weak tool when compared to the strong emotions that drive spending. You can think about this post and tell yourself that you’ll avoid razor blade tactics in the future. But eventually you forget what you read. Believe me, I know. In the past, I’ve fallen for the razor blade trap many times. It’s like algebra. I learned about it once, but it hasn’t stuck with me through the years.

Although I place little credence in consumer education, I do believe in the power of habit. To avoid the pitfalls of emotional spending, there’s no substitute for a rational system that receives regular use. My checklist program, for instance, prompts you to think over future ownership costs for each and every purchase. See Spend Less Now! at p. 41 (“consider hidden ownership costs [of] . . . frequently replaced components”). This approach works better than passive lessons, because you learn by doing and what you learn eventually becomes a habitBottom line: you’re far less likely to get razor bladed.

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As disclosed above, I own several razor blade-type products. I bought most of them long ago. Whenever I shop for a refill, I run through the products buying checklist. Of course, the precise tactic I choose varies depending upon the particular razor blade. Consider these examples.

Water Filters. I own a Pur water pitcher which uses only Pur water filters. These proprietary filters are expensive, but filtered water still costs less than bottled water. My adopted tactic for scoring cheap filters is to buy them in bulk. See Spend Less Now! at p. 46 (“look for special offers on prices . . . volume discounts”).

Computer Printers. I own a Brother printer. I used it a lot when I was writing the book. To lower my expenses, I printed in draft mode and used ink-miser fonts. See Spend Less Now! at p. 56 (“make the item last”). I also paid for toner using pre-tax dollars since the book was a business. See Spend Less Now! at p. 125 (“Pay With Pre-Tax Dollars”).

Sweepers With Swiveling Capability. Instead of disposable refills, I use microfiber cloths. They pick up dirt every bit as well as the refills. See Spend Less Now! at p. 26 (“use what I already own”). For a prior post in which I blogviate about the many virtues of microfibers, click here.

E-Book Readers. Mrs. Moose and I love our Kindles, but we don’t blindly load up on expensive books. Instead, we browse for FREE content. See Spend Less Now! at p. 26 (“get it FREE”). Mrs. Moose downloads books from sites such as eBookDaily.com. I retrieve content from sites such as Gutenberg.org. For a prior post in which I blogviate about FREE e-books, click here.

Razors. Oh yeah, I own one of these too. My chosen tactic is to extend the life of the blades. See Spend Less Now! at p. 56 (“make the item last”). After I’m done shaving, I immediately move the razor head a few times over a dry towel. This accomplishes two things. First, it dries the metal parts (as Maya Angelou might say, “moisture is the enemy / of razor blade longevity”). Second, it hones the razor for future use (I move the blades upwards; I’m sharpening a razor, not shaving a towel). With this habitual care, blades last about six months. For a prior post in which I blogviate about how to save on shaves, well, you’ve just read it so this time you don’t have to click anywhere.

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