Cutco's Business Model

 This is a continuation of my reflection of working at Vector Marketing during the summer of 2020

When viewing a demo from a Vector Marketing sales rep, you'll come across a video that not only describes how great the knives are but also how all Cutco products come with a Forever Guarantee. This guarantee includes free sharpening and free replacement for all Cutco pieces, no matter who owns it and no matter how long it has been in use.

To clarify, the free replacement only happens during the first couple of weeks of owning the Cutco pieces. After that, you get discounts on the replacement costs (estimated around 50% or more on the discount). For sharpening, that's free no matter what. Either you can have your Cutco rep sharpen it for you for free or you can send it back to the Cutco factory in Olean, New York for the free sharpening (except you have to pay for the shipping costs). 

So, with a company that doesn't charge you for sharpening, that makes little to no money on replacements, and that sells products that are guaranteed to last forever, how do they make money?

It's simple. By releasing more products, Cutco can sell more to its current customers and to its new customers. 

You need to remember, there are so many people in this world. Especially since they mainly operate in America, where you have a population of 328 million people, that is a lot of Cutco to sell. Plus, not many people own Cutco. Those that do are still a minority. Most people have cutlery sets that are moderate in quality and performance and that wears off after a few years of use. Some own high-end cutlery sets from Cutco's competitors like Wustof and Shun. That leaves for a small number of people that own Cutco.

Interestingly, Cutco's cult following is so strong that Cutco customers are more willing to buy their new products. In Vector Marketing, most reps say that selling to existing Cutco customers was their easiest sale as those people already had a great experience with Cutco and would love to get more Cutco as well. For my parents, since they already had a piece of Cutco as a gift (from our realtor), they understood how great Cutco was and that made it a lot easier for me to sell them more Cutco. If people knew the benefits of Cutco, then they're more inclined to buy more Cutco.

Furthermore, many people like to give Cutco as gifts. Most of those people happen to be sales professionals and even business owners. For sales professionals, people that are realtors tend to give a piece (or pieces) of Cutco as gifts to their clients after closing a transaction with them. For business owners, many of them like to give Cutco to their best customers, vendors, and even to their employees. At one instance, there was even a home builder that would give every home buyer a set of Cutco as a gift for buying his homes. Some may even give Cutco as a gift for someone's wedding, birthday, anniversary, or any other celebration. Cutco pieces have been given as gifts for many years.

Altogether, because Cutco is purely a product-based company, it creates revenue growth by expanding its product offering and by selling products to new customers. Since its products perform really well, Cutco has built a cult following for its products. This has allowed the company to monetize its existing customers. As long as Cutco can continue to find more products to create and release, the company can continue to grow and generate immense profits.