Bait and Hook Business Model
The bait and hook business model is to sell a product at a very low price (bait) in the hope of long-term profit from the purchase of spare parts, consumables, or services (hook).
The bait and hook model is a sales strategy in which a basic product is offered at a very low price (even incurring losses) and then forces the customer to repeatedly purchase spare parts, consumables or services that have a relatively high price. .
Origin of the bait and hook model
The origin of this business model dates back to the end of the 19th century. At that time the merchant King C. Gillette invented a razor where the blades were disposable. This avoided the inconvenience of having to sharpen the traditional blades, it was enough to change the razor blades for new ones.
Gillette then devised a business model where it sold the machines at a very low price, attracting customers and then making long-term profits from the repeated sale of razor blades.
Advantages and disadvantages of the model
The great advantages of the model are customer loyalty and ensuring long-term profits. The disadvantages, on the other hand, come from the risk of selling bait units without achieving sales of spare parts or consumptions. There is also the problem that a competitor can produce compatible parts or consumptions and appropriate the proceeds from the sale of the bait.
Bait and hook examples
- Razors: Razors (bait) and spare blades (hook).
- Video game consoles: Console (bait) and game licenses (hook).
- Printers: Printers (bait) and ink cartridges (hook).
- Water dispensing fountains: Water dispenser (bait) and water bottles (hook).
Tags: Business accounting history