CFA Level I · CFA Level I Exam · Business Models
A firm sells a printer at a low price and earns most of its profit from proprietary ink cartridges that customers must buy repeatedly. This pricing approach is best described as:
This is best described as a razor-and-blades model. The firm sells the printer cheaply to attract customers, then earns most of its profit from repeat sales of the proprietary ink they must keep buying. Freemium and cost-plus pricing work differently.
- Aa razor-and-blades model.Correct
- Ba freemium model.
- Ca cost-plus model.
Explanation
A low-priced base product combined with profitable repeat purchases of a consumable is the razor-and-blades model. Freemium offers a free basic service with paid upgrades, and cost-plus sets price by adding a markup to cost, neither of which describes this.
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