The Power of an Aftermarket Strategy to Drive Long-Term Profitability

Behind many successful businesses is an aftermarket strategy that quietly generates the majority of their profits. From aircraft engines to coffee pods, companies rely on recurring sales to customers they’ve already acquired. 

The aftermarket business strategy was conceived in 1906 by King C. Gillette to sell safety razors and blades. It was Gillette’s idea to “give the razors away, but charge whatever traffic will bear for the blades.” Gillette’s aftermarket strategy and his safety razor patent made him a millionaire and the strategy, which became known as the “razors and blades business model,” is still successfully used by the Gillette Corporation 120 years later.

Not to mention, that same playbook has since been copied by nearly every major consumer and industrial product category because it works! Aftermarket sales often eclipse primary product sales for both profit and revenue generated. It’s more common than not for industrial and consumer goods manufacturers to rely on their aftermarkets for profitability because the aftermarket transforms a one-time equipment sale into a long-term profit engine fueled by consumables, parts, subscriptions, and services.

Examples of Aftermarket Profitability

• In 2023 at GE Aerospace, 70% of the company’s revenue derived from aftermarket engine maintenance and support, which they cited as higher-margin income than new sales.
  
  
• In a recent analysis and forecast for aerospace and defense, construction, and medical manufacturing, aftermarket services were found to account for ~40% of total revenue and 50% of profits.
  
  
• The aftermarket dominates the coffee industry, a clear illustration of how consumables eclipse the hardware they depend on. The global pods market is roughly 10x that of single-serve machine sales. Third-party data show Keurig Dr Pepper generated $3.6B from pods versus $772M from brewers, > 4x revenue from the aftermarket than the machines themselves.

The Core Mechanics of Aftermarkets: Installed Base and Lock-In

There are two essential parts to an aftermarket strategy: installed base and lock-in. The installed base is what makes the aftermarket so enticing to businesses because aftermarket products and services are sold repeatedly to the entire installed base of primary product customers. In order to sell to the installed base over several years, a solid aftermarket strategy requires that customers are locked in to using the aftermarket product or service to make the original product work (think ink cartridges that make a printer work).

Here’s a simple example that illustrates the power of a profitable aftermarket strategy and why the installed base is essential to its success:

Say you’ve patented a new three-prong staple and stapler. There isn’t a huge market for your new stapler. You only expect to sell 100 per year for the next five years.

Selling 100 staplers each year grows the installed base by 100 customers each year. After five years, the installed base includes 500 customers.

Because your stapler is patented, your company is the only producer of three-prong staples. Not only do you sell these staples to your entire installed base of customers, but you’re repeatedly selling to them because they’re locked in.

Assume that each customer buys five boxes of staples a year, sales now look like this:

After five years, selling just 100 staplers per year results in 2,500 boxes of staples sold annually. By year five, you’re selling 25x as many boxes of staples as you are new staplers. 

Less revenue volatility also makes aftermarkets more appealing than primary sales. Even if you stop selling staplers after year five, a durable installed base still generates steady demand, allowing you to sell 2,500 boxes of staples each year from years 6 through 10.

This stability holds unless a competitor introduces a breakthrough stapler that pulls your customers into a new ecosystem – the way ridesharing overtook traditional taxis. Short of a true category disruption, aftermarket sales tend to remain far steadier than primary product sales.

How Companies Create Aftermarket Lock-In

If customers are able to buy their aftermarket products from competitors or third-party suppliers, then the entire strategy falls apart. Aftermarket sales are strongest when customers are locked-in to buying from the company that sold the primary product. Customer lock-in can be achieved through a variety of means including service contracts, technology, service expertise, and patents.

Mobile Phone Service Providers

Lock-in through long-term service contracts has been used for years. Providers offer free or deeply discounted phones in exchange for multi-year contracts, ensuring customers stay within their network for both primary use and aftermarket services.

3D Printers

Many 3D printer manufacturers use technology and material specs to create lock-in. Some printers only accept proprietary filament spools or resin cartridges, often embedded with chips or QR codes that prevent third-party materials from being used. This ensures ongoing sales of high-margin consumables – filament, resin, nozzles, and maintenance parts – long after the initial hardware purchase.

Automotive Service Expertise

Car manufacturers rely on specialized dealer training and diagnostic equipment to lock customers into their service network. Certain vehicle issues can only be identified or repaired using manufacturer-provided tools, ensuring dealerships maintain aftermarket service revenue from the customers they originally sold to.

Razor Manufacturers

Gillette, Schick, and others patent their razor handles and blade designs to prevent third-party companies from selling compatible replacements. When patents expire, manufacturers introduce new features and new blades to extend lock-in – fueling the ongoing “razor wars.”

Pricing Strategies for Aftermarket Growth

A very simple aftermarket strategy is to deeply discount the primary product to entice new customers into the installed base. Even if the primary product is unprofitable, a company can lose money on every sale and still make it up on aftermarket volume. As a result, businesses with aftermarkets often compete very aggressively on price for new customers.

However, aftermarket differentiation based on price can create problems because it tends to attract the most price-sensitive customers. Someone excited about getting a deeply discounted 3D printer isn’t necessarily eager to pay premium prices for proprietary filament or resin. This tension has fueled a cottage industry of third-party materials and no-name consumables, as customers look for cheaper alternatives to expensive original equipment manufacturer supplies (or OEMs). And when the primary product is priced aggressively low, it lowers switching costs and makes it easier for customers to abandon the ecosystem entirely. This shrinks the installed base and undermines the very aftermarket strategy the pricing was meant to support.

Aftermarket Strategy in Action: The Forio Model

Aftermarkets aren’t just a pattern in consumer or industrial markets – it’s embedded in digital learning ecosystems as well.

Interestingly, Forio’s own business model is a clear example of a modern aftermarket strategy in action. A university or organization purchases a simulation once, but the real value comes from years of recurring learner usage. Each new cohort becomes part of the installed base, and the simulation – like a durable primary product – continues generating recurring revenue and value long after its initial creation. The result is a simulation that delivers increasing ROI over time, as each new cohort generates fresh value from a one-time development investment.

Some of Forio’s most popular simulations thrive on this aftermarket model:

• Everest Teamwork and Leadership Simulation (Harvard)
  
  
• The Beer Game (MIT)
  
  
• Easy Meals (Emory University's Goizueta Business School)

This combination of enduring storytelling, recurring use with new cohorts, and seamless curricular integration makes Forio simulations one of the cleanest digital aftermarket models operating today.

If you’re considering a custom simulation, our team can help you design it with a long-term aftermarket strategy in mind.

3 Ways to Create a Successful Aftermarket Strategy

The strongest aftermarkets come from companies that think beyond the initial sale and design the entire customer ecosystem with intention.

1. The primary product should be durable. Every primary product replacement is an opportunity to lose the installed base to competitors. Providing low-cost or free primary upgrades can reduce the likelihood that customers will switch to competitors.

2. The aftermarket product or service cannot be a commodity. Lock in customers to your aftermarket through patents, service expertise, service contracts, and technology.

3. The aftermarket product or service should drive recurring use. These offerings work best when customers need them repeatedly and frequently; this is how you fully leverage the value of your installed base and generate predictable, long-term revenue.