Razors and Blades in the Printer Business
Copyright Jack Mixner. 714 49 1040. www.mixnerstrategy.com
We all know the drill. Buy a new ink jet printer for $40 or so on sale, then, in the not-so-distant future when the ink cartridges are empty, spend $120 to refill the printer.
Kodak is proposing to do it differently. In March they will launch a new printer system relying on new inks and technology that reduce the replacement cost of a cartridge to between ten and fifteen dollars. Prints are archival, destined to last one hundred years, instead of the fifteen expected from current systems (Hamm, page 42). Overall cost reductions total fourteen cents for a Kodak print from the new Kodak system, a substantial (about sixty per cent) savings.
Kodak has been at the brink of failure for fifteen years or so, with various film-based divisions closing periodically. The new strategy represents a make/break strategy for Kodak. The strategy represents a departure from the razors and blades strategy of Kodak's competitor like HP, whose cheap printers require expensive HP inks. HP won't roll-over on this. The fight may be fierce. It will be interesting to watch what happens.
Reference
Hamm, Steve. Kodak's Moment of Truth. BusinessWeek. 19 February 2007. Page 42.