The Myth of Razors and Razor Blades and Brand Loyalty as a Form of Protectionism

Sometimes I find the opinions of Mike Masnick (Techdirt) to be strangled by an irrational commitment to the embrace of open intellectual property regimes.  That said, when he gets it right, there’s no better IP oracle on the Net.  The linked article is of the latter, not the former. Most exciting is the notion that brand loyalty can translate into an IP protection no law could enforce all while maintaining better pricing than IP laws can hope to afford.  Check this excerpt and take a look at the article:

…it actually makes perfect sense, the more you think about it. With patents, Gillette priced the razors (and, potentially, the blades) artificially high, creating a smaller, artificially limited market. This has long been our complaint with patents in general. Once the patents expired, and actual direct competition became more of an issue, then Gillette finally had to price to the market, capturing a much larger segment of the market, driving up revenue and profits because of it. As for why once the patents were no longer a serious issue, this strategy still worked, I think Picker underestimates both the value of brand loyalty and convenience, as well as mental transaction costs.

That is, even if others offer compatible blades for Gillette products, people are generally loyal to the overall platform brand if it hasn’t done them wrong. Not everyone will be, of course. There will always be some pure price shoppers who look for the best deal. But many people will remain generally loyal to Gillette, and with more customers coming in due to market pricing, the net benefit could be much greater. On top of that, people don’t want to have to worry about whether or not the blades will really fit or really work as well. They’re likely to feel more comfortable going with the brand name that is the same as the razor maker, knowing that it will work, and that there’s a level of quality involved. Choosing a different brand of blade involves risk and mental transaction costs that many users just won’t want to bother with.

JNOMICS