Article on "Why is Gillette so successful" by Shruti Agarwal

 Why is Gillette so successful?

 – The Marketing Case Study

Shruti Agarwal, Roll No.: 235

B.Com Semester IV , Session 2020-23

INTRODUCTION:

Gillette is an American brand of men’s grooming and other personal care products including shaving supplies, owned by the multi-national corporation Procter & Gamble. You must be seeing this brand’s advertisements every day on your TV screens and when it comes to beard shaving and men’s personal care, the top most name that strikes your mind is – Gillette. Gillette is used by almost 750 million men in more than 200 million countries. Do you know how Gillette became one of the market leaders in the world?

MARKETING STRATEGY OF GILLETTE:

In 1921, when new competitors started entering the market, Gillette saw a massive decline in its product sales by 20% by the end of 1921. It was when Gillette needed to come up with a good marketing strategy to boost its sales. Gillette tweaked its pricing model and called it a ‘Razor Blade Strategy’. There are two complementary products attached to the strategy. The primary product is the razor and the secondary is the blades. Gillette reduced the cost of its razors and started selling them at an ultra-cheap price and low margins and strategized to sell blades at a higher profit margin. To understand it in a simpler way, Gillette let the customers do one-time purchases (razors) at a lower price and won them over as loyal customers. Now the same customer will come back, again and again, to purchase the high-price margined blades for the use of razors that was bought earlier. That’s how Gillette started making a recurring profit from the sale of blades even after selling the razors at low-profit margins. This amazing marketing strategy followed by Gillette made them huge sales with an increase of 127% by the end of 1922, i.e in just one year, Gillette was able to increase its sales by 127% as well as retain its customers for future sales.

CONCLUSION:

This massive increase in sales for the company serves as an inspiration for many other companies today. Companies like Sony use this same pricing model for selling PlayStation in the market and makes recurring profits by selling CDs and game subscriptions. Amazon Kindle also uses this same strategy by selling its kindle at a lower margin and sometimes even at a zero profit margin and retains its customers for its increase in demand for E-book subscriptions.

Therefore, we can conclude some important pointers from Gillette’s Razor Blade Strategy:

1. Razor Blade Strategy is a pricing model in which one good is sold at a low or zero profit margin and its complementary good is sold at a higher profit margin.

2. This strategy helps the companies in maximum consumer retention and recurring profit through the sales of their secondary product.

3. There is an example of a camera-selling company called Kodak, which used this same strategy by selling cameras at a lower margin and hiked the prices of the film rolls. But after a certain point in time, this strategy backfired on the company’s profits and incurred huge losses due to less demand for film rolls and the rise of digital cameras.

Reference links:

https://youtu.be/YRYLPeWCOP0

https://en.wikipedia.org/wiki/Gillette

https://www.forbes.com/companies/gillette/?sh=4419a0dc10a0