Q1. Evaluate Product innovation at Gillette throughout its history. Has Gillette been a victim of its own success? Has product innovation in the wet-shaving market come to an end? Explain. Gillette did not focus too much on product innovation until several years later. There was no need to focus on innovation because they dominated the market for so long with no new competitors in the industry. It wasn’t until later on that Gillette started working on product innovation when a competitor entered the market. In 1962 an English firm named Wilkinson Sword entered the market with stain-less steel blades. Luckily for Gillette, they were able to buy out this competitor and remain dominate in the market. Even though they were able to buy Wilkinson Sword out this still had a negative impact on Gillette because it made their market share drop to $1.33 per share.
There was several times where Gillette became a victim of its own success. The first is in its early years when they dominated the market with no competitors. When Gillette saw this continued success the company wanted to try something new so it decided to buy two business ventures unrelated to the personal grooming industry. The companies were the Toni Company and the Paper Mate Pen Company. This was a bad idea because the attention was then turned to these new products and the other product that was already performing so well was being ignored. As time moved forward a new competitor (Wilkinson Sword) entered the market and caught Gillette off guard.
Another instance where Gillette became a victim to its own success is when Gillette began to flood the market with its own product innovations. In the early 90’s Gillette constantly developed product after product. It is good to always improve existing products but only when the market is competitive. With every new invention sales would decline from the previous invention. This would have been a good strategy to implement had other competitors been in the market but since there were no other competitors Gillette was essentially competing with and ultimately hurting themselves.
Product innovation in the wet-shaving industry is slowly coming to an end. Gillette and Schick both were able to continue product innovating from one all the way up to 5 bladed razor blades but after that neither company expanded into creating a six or seven bladed razor blade because they both saw that there really was no difference in consumer preference. For Gillette consumer reports showed that there was really no difference in shaving results from the 5-blade Fusion to the Mach3 or even the Quattro from Schick. Another thing that shows that this product innovation is declining is the invention of razor blades with refillable cartridges. Gillette designed a razor blade that would be a one-time buy only product but had blade cartridges that were interchangeable. When the blades became dull you would simply replace the head instead of throwing away the whole razor. This was not a successful idea because sales showed that the sale of the razor blade handles were much greater than the refillable blade cartridges.
Q2. What do you make of the razor wars, first between Gillette and Schick, and now with online competitors? Does Gillette face a serious threat from competitive inroads? Explain.
The razor wars between Gillette and Schick can be looked at as both bad and good. It was bad or difficult for the two companies because they had to both be highly competitive with one another to ensure that their products were leading in the market. When one company came out with a new product the other company had to “one up” them and come up with a better product. We can only imagine how difficult and competitive it must have been for the two companies to strive to be number one in the industry. The razor wars can be looked at as being good as well, but from the consumer’s perspective. This constant fight between the two companies on who was going to be the better company meant that consumers were going to have continued access to new and improved products from the two companies. In other words, during the battle the innovated technology in the razor blade industry was always up to date and consumers could guarantee that they had the best thing out there at the given time.
Like many other industries, the razor blade industry began to shift to online retailers. An increase in razor blade production costs has led to the startup of several internet razor blade companies. These companies are becoming threats to Gillette because not only are their products cheaper, but they are also delivered directly to consumers homes once a month which make it a lot more convenient for them. As prices began to increase greatly by Gillette and other offline competitor’s consumers became more reluctant to purchasing highly expensive razor blades. While Gillette has a quality designed razor blade that has multiple blades per razor, consumers started to realize that they can get the same or similar results when shaving by using a substantially cheaper razor that only uses two to three razor blades that can be found online. This price difference between Gillette and online retailers quickly became a big threat to Gillette and its market share.
Q3. What actions would you recommend over the next five years that could help Gillette maintain its worldwide dominance in the shaving market? What specific marketing program decisions would you recommend? Should Gillette be worried about its pricing strategy? Explain.
Over the next five years in order to ensure that Gillette maintains its worldwide dominance in the shaving market I would recommend that Gillette strives hard in creating complimentary products for their existing products. During the Razor wars, Gillette learned that there is only so much they could do to improve their razor. They need to now focus on producing other products that complement their existing products such as shaving creams, shower gels, and other shaving necessities. We already know that millions of men and women use Gillette razors daily for their shaving needs. If Gillette can become the number one leader in both razor blades and other shaving products this can create a household name for them.
As far as marketing goes I would recommend that Gillette prides itself on being the world’s largest and only shaving product company. Gillette should stay away from investing in other unrelated business ventures. When companies do this they often try and implement the same strategies for both businesses without realizing that different businesses require different strategies. Because Gillette wanted to experiment with different business ventures, this resulted in them losing a good amount of their market share to a competitor that entered the market. Gillette already dominates the wet-shaving market. Maybe they could move into the dry-shaving market as well. Although results showed that most men prefer wet-shaving over dry-shaving it might be in Gillette’s best interest to expand into the dry-shaving market as well just to ensure that they become the “house hold” name for all shaving and hair removal products for consumers. Gillette should focus on eliminating all online and offline retail competitors. By doing this Gillette can remain dominant in this industry entirely.
Gillette really needs to re-evaluate their pricing strategy. With each new product innovation there is an increase in production costs; because production costs are increasing Gillette has to raise the prices of its razor blades to offset the increase in production costs. On average men spend around $25 a month on shaving products. Research conducted by Gillette indicates that men are trying to reduce their monthly costs of purchasing razor blades by cleaning and re-using their old ones. Since customer reports have shown that adding more blades to a single razor does not improve shaving results, Gillette should stop trying to innovate its existing razor blade technology and should focus more on bringing down production costs of their existing razors which would in turn bring down the prices they charge consumers for the razors. A change in their existing pricing strategy can really help Gillette overcome the threat that is given to them by online retailers.