Revenues are spread over the lifetime of a product. After a flat fee, customers
have recurring expenses they can’t refuse. (e.g. Razor blades, coffee pads,
updates GPS devices, etc.)
#26 Razor-blade Third Party
pays the bill
For the user.
How it usually works - General visualisation
Nespresso doesn’t earn (much) on their coffee machines (they
don’t even make them themselves). All of the money comes
from the pads. Interesting fact: Dyson chose for the opposite
strategy by taking away vacuum cleaner’s bags.
“An update is still cheaper then a new GPS system, right?” This
is exactly how Tomtom and Garmin made big money for years.
Users choose to either pay or use outdated maps.
2. Tomtom GPS updates
2 Examples to turn theory into practice
Recurring Premium Price