This ConsumerGram is the second in a series of three reports on small steps that consumers can do that can add up to big savings. In our first report, we discussed how consumers can save by buying in bulk and bundling, and how tap water is both safe and cost-effective compared to bottled water. As this second report notes, we discuss how consumers can avoid some costs.
Understand Total Costs
We picked up a popular triple edge shaving razor at what we thought was a competitive price, but, upon comparison, we found the razor blades (sold separately) were priced three times more than the razor itself. How can that be?
Razors and blades are a classical example of how some products have both a fixed and variable pricing component. An inexpensive air freshener may have expensive refills. You can purchase an electronic game platform, but then you need to buy the games to operate it. The secret to not getting duped by hidden costs is to understand the total costs of operating the product. While this usually works with a little research, the total costs are not always obvious, as we will explain.
Inkjet Printers
Like the razor/blade pricing, inkjet printers come with hidden costs that can result in hundreds of dollars of losses for consumers each year. Consumers often find that, when buying a personal computer, the printer is cheap, sometimes even free. However, when it comes time to print, consumers soon discover that most inkjet printers are very expensive to operate. The fact is that the average consumer with an inkjet printer spends about $200 per year on ink, a price more than the cost of most new inkjet printers. This razor/blade pricing strategy means lucrative profits for printer manufacturers, but it also means that consumers have pent-up demand to print. Consumers know there are printer and inkjet cartridge costs, but seldom are they aware of the exact cost of printing a page. This puts consumers at a disadvantage when buying a printer and, after they purchase a printer, managing printer costs.
The fact is that prices vary tremendously. One popular printer can cost a consumer 13 cents to print a single page of black text and 50 cents for a 4×6 photo, while another brand’s printer can cost only 2 and 10 cents, respectively.
What Can Consumers Do?
Consumer need to understand the total cost of printing – the upfront cost and the operating costs – before you purchase a printer. If you are stuck with an inefficient printer, look for remanufactured or refilled cartridges, which can reduce your ink costs by about 30% off the price of buying a new cartridge. If you are looking for a new printer, compare printer costs per page. If you can’t get this information, do not buy the printer. A reasonable price per page should be about 2 to 3 cents per black text page, which is about 60% less than most consumers pay today for inkjet printing. If you buy a more cost-efficient printer, we estimate that consumers could save about $560 over the next 5 years. So, simply compare costs per page and understand the total costs of printing.
Summary
The razor/blades pricing model is a clever way for manufactures to trick consumers into paying too much. We see this practice in air fresheners and their refills, vacuum cleaners and their bags, mops and their replacement heads, game platforms and software, and printers and their ink cartridges. Becoming better informed about the total cost of the purchase is a way to save money and avoid these hidden charges.