One of the great marketing rules of all time comes from the shaving business: give away the razor; charge a lot for the blades. Gillette, now part of Proctor & Gamble Co. (NYSE: PG), showed the way, but Hewlett-Packard Co. (NYSE: HPQ) learned the lesson well and adapted it to the printer and printer cartridge business. It still works like a charm.
So why does a new company decide to put out a $100,000 razor with a blade that lasts 10 years? That’s what Zafirro has done has done with its Zafirro Iridium razor — and it may not be as dumb as it sounds.
The company has designed and built a razor made from iridium that uses platinum screws to hold it together and blades made of sapphire that uses “high-energy, ionized particles” that are sharpened to be 5,000 times thinner than a human hair. The blade is guaranteed for 10 years, and Zafirro will resharpen the blade for free as often as necessary.
Now whether the razor is worth $100,000, even in a limited edition of just 99, is an interesting question. The handle is 99.95% pure iridium, a member of the platinum group metals, and the most corrosion-resistant metal known. It is also among the scarcest metals around, with only about 3 metric tons mined every year. It is primarily used where high corrosion resistance is need at very high temperatures.
Iridium is a by-product of nickel and copper mining, as well as platinum and palladium mining. Johnson Matthey plc (OTC: JMPLY) is a major producer, but copper miner Freeport-McMoran Copper & Gold Co. (NYSE: FCX) doesn’t even mention iridium in its 2010 annual report.
Iridium, like uranium, has no public market — all sales are either contracted or brokered. The current price is about $1,050/ounce.
Together with the platinum screws and the sapphire blades, the Iridium razor probably contains $5,000-$10,000 worth of raw materials. Now this may have meant that the company could have sold the razor for half of less than its sticker price and still have made money.
The company’s bet, of course, is that the virtual indestructibility of its razor will mean that it will acquire instant heirloom status and that among those who can afford such a gizmo the razor will be cherished as if it were a Patek Phillipe watch.
The comparison is not as odd as it sounds. The elements of which the watch and the razor are made constitute a large chunk of their value. Gold and platinum in the watches; iridium and platinum in the razor. But the biggest chunk of the value comes from the buyer’s imagination.
An investment of $100,000 in a high-tech, rare-materials-based razor is likely to appreciate over time — and given the shakiness in the global economy right now, having something solid that isn’t gold or silver may be worth the money to some potential buyers.
There’s also the vanity factor, of course, but we won’t go there.