Kodak's Razor and Blade Pricing Strategy
Before delving into the feasibility of Kodak's razor and blade strategy, one should have a clearer picture of what this really means. The business model that the American company has decided to use for its inkjet printer was introduced by King C. Gillette and consists of commercializing two complementary products of unequal value. In other words, a company applying such model will establish a master (core) product which is offered at an incredibly low price (and, sometimes, for free) and a secondary one (a consumable) which is vital to the former's functioning and which is sold at a higher price. Thus, the two products are closely linked to each other and represent a profitable business as the loss assigned to the master product is excellently compensated by the benefits attributed to the consumable. A classical example, in this regard, was Standard Oil's attempt to trade oil lamps in China. For successfully entering the Asian market, the US company offered almost 8 million lamps for free while establishing a high price for kerosene, the combustible without which the respective product couldn't be used (http://en.wikipedia.org/wiki/Razor_and_blades_business_model). Consequently, Kodak has considered that such technique can be
In conclusion, Kodak offers an ambivalent instrument that targets multiple segments, at the same time. The American company's initiative has been strongly questioned by both analysts and competitors. Even if this fails to convince adults, it will surely persuade children who are said to be restricted from printing in 70% of the American families because of the ink costs (Bulkeley, 2007). Consequently, if Kodak convinces these customers that the inkjet printer it offers provides the highest quality at the lowest price than this niche could turn out to be a significant profit provider. Between a car which costs more but needs less fuel and a car that costs less but consumes more fuel, a person would probably opt for the first alternative as he/she buys the car once but purchases fuel on a regular basis. Another argument offering a positive forecast for Kodak's initiative is the fact that low price cartridges are the most prominent feature that consumers are said to be looking for. This option represents an extremely favorable wind for Kodak's ship as the American corporation, unlike its rivals, has incorporated all the electronics in the printer. Yet, when making a list of pros and cons, the first category seems to prevail and forecast a favorable outcome for Kodak's printer. For instance, Hewlett Packard's marketing vice president states that photo printing can be considered a significant market slice but almost 90% of the pages printed are not snapshots (Bilkeley, 2007). Hence, if the former is rather cheap, the latter is provided at a higher price for resulting in an overall profit. On the other hand, the company has paid attention to all the aspects that may hinder the penetration strategy from having the desired outcomes. Actually, the idea of entering the printer market could be assigned to Kodak's attempt to refresh its look and start from scratch in a field that is highly required by contemporary consumers. In conclusion, the firm will be able to provide an irresistible blend of low price, high quality and large quantity. To conclude with, the inkjet printer could prove to be both an inspired initiative and an excellent opportunity to replace the film photography segment that used to account for most of Kodak's revenues and its worldwide fame. Even though such argument is backed up by a logical interpretation of the statistics, this can be contradicted by invoking two major counterarguments.
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Acceptance Essays
