Page 105 - 100 Great Business Ideas: From Leading Companies Around the World (100 Great Ideas)

42 VENDOR LOCK-IN

Developing products that are only compatible with other products
in your range shuts out competitors and ensures repeat business
from customers.

The idea

Being able to devise a foolproof strategy for retaining customers
and maintaining a steady, reliable stream of revenues is the dream
of many corporate executives. By using vendor lock-in—ensuring
customers are dependent on your products and unable to move
to another vendor without substantial switching costs—you can
achieve this.

Gillette’s razor-sharp business acumen exploits vendor lock-in.
Its razor blade handles are only compatible with its brand of razor
blades; consequently, its razor blades are the primary source of
income. Manufacturer of electronic toothbrushes Philips Sonicare
also uses vendor lock-in. Its toothbrushes have an electronic base
that requires a Sonicare replacement toothbrush head, ensuring
customers will return to Sonicare and preventing them from
switching to another manufacturer. Switching cost is the cost a
consumer incurs when purchasing from a new company and is a
key aspect of vendor lock-in. The higher the switching cost, the less
likely a customer is to switch.

This concept is not new. Many businesses do this: printer
manufacturers like Hewlett-Packard, camera companies such as
Canon, coffee retailers such as Nespresso, all provide proprietary,
reusable components for their products. These businesses ensure

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