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The strategy of giving away a core product to make profits on a complementary product has significantly influenced the business models of companies like Gillette and Microsoft. Gillette, for instance, gives away its core product, the razor, to make substantial profits on the complementary product, the blades. Similarly, Microsoft barely makes money from consoles, but when competition intensifies, they can drop product prices and raise the willingness to pay for complements to protect overall margins. This strategy allows these companies to attract customers with a low-cost or free core product and then generate revenue through the sale of complementary products.
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Ever wondered what strategies make Apple, Amazon, and other juggernauts so successful? Better, Simpler Strategy by Felix Oberholzer-Gee shares top ins...
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Companies that make their own complimentary services can shift profits from one product to another. Gillette gives away its ""core product,"" the razor, in return for substantial margins on the complementary product blades. Microsoft barely makes money from consoles. When the competition heats up, they can drop product prices and raise WTP of complements to protect overall margins.
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