In many markets, the “razor/razor blade model” is king. As a company you have invested millions into development of a piece of capital equipment and you plan on selling it at minimal margins, a cost neutral price or maybe even at a loss. In return there is a high volume, consumable aspect of your product that will provide continuous revenue for years to come. This revenue stream is where development costs are re-couped and healthy margins are carried forward to sustain your business.
This model works great for reducing the barrier of entry to get your product into the market by reducing your customers up front investment. It also helps you protect future business because customers can rely on this capital equipment infrastructure and are compelled to continue using your consumables.
This revenue is the lifeblood of your company, it returns value to shareholders, provides capital to fuel future research & development, grow your sales force and provide the world class support that your customer depends on.
The biggest challenge with the razor blade model is that there is real risk of your customers may start using the wonderful capital equipment that was given to them with a generic, re-furbished or re-processed consumable product that is sold by a 3rd party and is not contributing revenue to your business.
After all of the up front development costs and fixed costs of your business, the revenue stream is stolen by a 3rd party! This is hardly fair but a disruptive reality in today’s global economy.
There may be legal protections in place but this is difficult to enforce, expensive and time consuming to defend. Especially with degraded revenue caused by the offenders.
With foresight and minimal investment in a secureASIC from Triad Semiconductor, you can protect your revenue stream by design.