The Razor/Razor Blade Model-- Watch the On-Going Costs
Ever heard of the Razor/Razor Blade model? It is a simple marketing model that works like this: give away the razor, and profit from the razor blade sales that follow for years on end.
I am sure you have gotten a new razor "giveaway". You usually get it free or at cost, then you pay premium dollars for the razor blades without which, the razor is essentially worthless.
This model is all round us everyday. Don't believe me? Think about your cellular phone-- probably got it "free" with a two year service plan . . . How about your cable? The box is "free," but the service is highway robbery.
In any of these models, the onetime "loss" is more than recouped via the monthly bill . . .
My advice is to always be on the lookout for this Razor/Razor Blade model in action, and be mindful of just what you are getting yourself into.
Categories: Money Savers, Personal Finance, Consumerism
Tags: Money Savers Personal Finance Consumerism
Another good example is the video game console. It's rather cheap at $100 to $300, but each game is about $20 to $50. So, over the life of the system, you might easily spend $1,000 on just the games, and without the games, the console isn't a good investment at all.
I call these "associated costs", and sometimes they are known as "hidden costs", but they're not really hidden unless we go into things with our eyes closed.
A recreational vehicle is nice to have (I suppose), but there are payments, insurance, maintenance bills, repair bills, fuel costs, licensing fees, personal property tax, and a cost to park and store it. In addition, it must be cared for even if it isn't used much so it consumes time AND money.
We are well advised to look at total life-cycle costs to get a better picture of what our "cost of ownership" really will be before we make a purchase.
Clair
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Think Apple Ipod Shuffle ($50) and ITunes at a buck a pop . . .
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