Why the second unit is where the margin lives

A printer costs less than its ink cartridges over a year. A razor handle costs less than a month of blades. The pattern is stable across industries: the durable good is sold at or below cost, and the consumable attached to it carries the margin.

What everyone sees

The cheap printer looks like a bargain. The buyer evaluates the purchase price against alternative printers and finds it competitive. The lifetime cost — which includes every cartridge bought over the printer’s life — is not the comparison made at the point of sale, because the point of sale shows one number and the lifetime shows many.

What is actually happening

Gillette’s razor-and-blades model is the textbook case, formalised by Emch as a two-part tariff. The durable good is sold below cost to maximise the installed base, and the consumable is sold above cost to recoup the subsidy plus margin. Ellison described add-on pricing: firms compete aggressively on the base good and collect margin on add-ons that are evaluated separately and later. The strategy works because buyers anchor on the visible, comparable price and underweight the less visible, less comparable ongoing cost.

Why it stays hidden

The margin hides because each refill is small. A cartridge costing thirty feels reasonable on its own; only when multiplied by twelve does it exceed the printer’s price, and the multiplication is not prompted by the receipt. The seller also benefits from the sunk cost: the buyer who has already purchased the printer is locked into the consumable, and switching requires buying a new durable, which makes the cartridge price look cheaper than the alternative it is actually competing with.