98 • 100 GREAT BUSINESS IDEAS
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