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FREE AS A BUSINESS MODEL Bait & Hook

104
Bait & Hook of Free Mobile Phones
PATTERNS “Bait & hook” refers to a business model pattern KP KA VP CR CS
characterized by an attractive, inexpensive, or
free initial offer that encourages continuing services contractual
lock-in
free phoness
free phones
future purchases of related products or services. free phone
This pattern is also known as the “loss leader”
device
customers
customerstomers
or “razor & blades” model. “Loss leader” refers manufacturers KR cus
to a subsidized, even money-losing initial offer CH
subscription
subscription
with the intention of generating profi ts from subscription
network
subsequent purchases. “Razor & blades” refers
to a business model popularized by an American
businessman, King C. Gillette, inventor of the
disposable razor blade (see p. 105). We use the C$ network R$ R$ n x monthl
n x monthl
n x monthly subscriptiony subscriptiony subscriptiony subscriptiony subscriptiony subscriptiony subscriptiony subscription
n x monthl
n x monthl
n x monthl
n x monthly subscription
n x monthl
n x monthl
term bait & hook pattern to describe the general phones 1 x free
1 x free
1 x free
1 x free
1 x free
idea of luring customers with an initial offering, services
while earning from follow-up sales.
The mobile telecommunications industry
provides a good illustration of the bait & hook
pattern with a free offer. It is now standard
practice for mobile network operators to offer
free telephone handsets bundled with service
subscriptions. Operators initially lose money
by giving away mobile phones for free, but
they easily cover the loss through subsequent
monthly service fees. Operators provide instant
gratifi cation with a free offer that later gener-
ates recurring income.

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