Free is the future of business

An interesting article from last month’s issue of Wired magazine, “Free! Why $0.00 is the Future of Business.” It opens with this story about Gillette disposable razors:

At the age of 40, King Gillette was a frustrated inventor, a bitter anticapitalist, and a salesman of cork-lined bottle caps. It was 1895, and despite ideas, energy, and wealthy parents, he had little to show for his work.

One day, while he was shaving with a straight razor that was so worn it could no longer be sharpened, the idea came to him. What if the blade could be made of a thin metal strip? Rather than spending time maintaining the blades, men could simply discard them when they became dull.

A few years of metallurgy experimentation later, the disposable-blade safety razor was born.

But it didn’t take off immediately. In its first year, 1903, Gillette sold a total of 51 razors and 168 blades.

Over the next two decades, he tried every marketing gimmick he could think of.

He put his own face on the package, making him both legendary and, some people believed, fictional. He sold millions of razors to the Army at a steep discount, hoping the habits soldiers developed at war would carry over to peacetime.

He sold razors in bulk to banks so they could give them away with new deposits (”shave and save” campaigns). Razors were bundled with everything from Wrigley’s gum to packets of coffee, tea, spices, and marshmallows.

The freebies helped to sell those products, but the tactic helped Gillette even more. By giving away the razors, which were useless by themselves, he was creating demand for disposable blades.

A few billion blades later, this business model is now the foundation of entire industries: Give away the cell phone, sell the monthly plan; make the videogame console cheap and sell expensive games; install fancy coffeemakers in offices at no charge so you can sell managers expensive coffee sachets.

Read the entire article.