Econ 101 This generalizes as the business model is based on creating a "basket" of complementary goods: https://en.wikipedia.org/wiki/Complementary_good https:

Econ 101 This generalizes as the business model is based on creating a "basket" of complementary goods: https://en.wikipedia.org/wiki/Complementary_good https://en.wikipedia.org/wiki/Complementary_good There are things like loss leaders and subsidies that are designed to create a funnel for customers, which you then convert into higher margin item sales. The popocorn at movies is a great example. Warranties and online shipping fees are another one, as they are almost pure margin. Sure, you may make a 10% unit margin on your $20 tchotchka (e.g $2), but you make 80% margin on your "shipping cost" of $10, so your gross margin selling tchotchkas is really $10 (or 50%). It's same as how printers are just a way to sell ink in cartriges, which has probably a 50x markup, or 5000% margin. This is only slightly different from the old music business, where you paid $30+ for a $0.10 blob of plastic wrapped in cardboard with a marketing machine on top of it. Social media has more of a publishing model, where their tech is "free," as a way to attract viewers to the ads they sell to advertisers. Most consumer software has this publishing model these days, whereas most enterprise software is really a channel to convert customers to high margin consulting and support services on top of the loss leader amortization of the cost of software development - which is why most of it sucks so badly. Like selling gas in stations, subscription revenue for tech is good, but it's monotonic based on users and inelastic, where what gas stations figured out is that their core "subscription" business was really just a funnel to get conversions for higher value users. For this reason, I'd speculate that gas stations periodically sabotage their pay at the pump machines, probably toward the end of a quarter, as a way to get a bump in people coming to the register and driving conversions to high-margin sugar/water products there.