Gillette has a razor sharp edge over its competitors
Founded in 1901, Gillette is the world leader in male grooming products. This category
includes blades, razors and shaving preparations. Gillette also holds the number one
position worldwide in selected female grooming products, such as wet-shaving products
and hair epilating (hair removal) devices. The company is the world’s top seller of
writing instruments and correction products, toothbrushes, and oral care appliances under
the brands of Papermate, Waterman, Parker and, Oral-B. In addition, this company is the
world leader in alkaline batteries with the Duracell brand.
Manufacturing operations are conducted at 57 facilities in 23 countries, and
products are distributed in over 200 countries and territories around the world. Gillette’s
sales in 2000 amounted to $9.3 billion. The company employs more than 40,000 people,
and nearly three-quarters of them are outside the USA.
As shown by the above statistics Gillette is a very successful consumer products
company. However, its current status was not achieved without some ups and downs
along the way. In the late 1980s, Gillette found itself in the precarious position of being a
victim of a market it helped create. In the 1970s and 1980s, inexpensive disposable
razors became the razor of choice. Gillette helped to foster this by participating in a
strategy that de-emphasized brand quality and focused on price. Marketing dollars went
to promotions, not to its then premium shaving system, the Atra Plus. Gillette was guilty
of teaching consumers how not to be loyal and how the best razor was the cheapest one at
the moment. By employing this strategy, the disposable razor market grew to over 60%,
of total razor sales. Gillette lost some of its quality image and saw its margins shrink,
which led to three failed hostile takeover attempts.
Gillette managers were forced to examine their position in the market or risk
losing control of their company. Gillette compiled and analyzed past sales information
that uncovered the flaws in its marketing strategy. Marketing research in the form of
focus groups and surveys revealed that Gillette could reform its approach to the market
by reemphasizing quality and brand equity in the hopes of reversing the trend. To
accomplish this, Gillette discontinued all advertising for its disposable razors and began
to heavily market its shaving systems. This effort led to the well-known Gillette
catchphrase, “the Best a Man can get”. Marketing research also revealed the critical
importance of developing and introducing new products. Therefore, Gillette began
making significant investments in reseach and development, developing new shaving
systems over the coming years (Sensor, Sensor Excel, Mach III, Venus etc.). In addition
to changing its advertising focus, Gillette has undertaken numerous direct mail
campaigns giving away free razors in order to further develop its brands. Gillette
believes that once men and women try its products and experience the superior quality
they will be willing to pay the premium.
Through its refocused marketing strategy, Gillette was very successful at
reversing the trend. Since the launch of its Sensor razor system, 10% of men switched
from using disposable razors to refillable razors. This shift gave refillable razors over
50% of the entire razor market. Gillette has continued this aggressive approach to
marketing the premium shaving systems and has become the clear market leader.
In addition to men’s and women’s razor markets, Gillette has refocused its
marketing efforts in other personal care segments. In each one, the focus is on creating a
distinctive brand and differentiating its products. Currently 1.2 billion people around the
world use one or more of Gillette’s products. About 700 million consumers use Gillette
razor blades. Across the consumer products industry, Gillette is considered to be one of
the most effective companies at translating brand muscle into revenues and profits, with
the likes of Coca-Cola and Proctor and Gamble.
Gillette’s success can be attributed to its willingness to rethink its overall strategy
based on marketing research findings. By simply examining internal historical sales
information, Gillette realized that the current trends would lead it further away from
profit growth and closer to the inevitable hostile takeover. The changes made based on
marketing research results throughout the past decade have made Gillette what it is today,
much to the delight of its stockholders. The market value of Gillette’s outstanding stock
increased from $6 billion to $53 billion from year-end 1990 to year-end 1998.
1. What were the events that led Gillette to decide to act?
2. What was happening in the industry at the time?
3. What was the management decision problem facing Gillette when it realized that
its brand equity had eroded?
4. What was Gillette’s marketing research problem?
5. What other courses of action were open to Gillette?
6. What criteria will be used to evaluate these alternatives?
7. What information did Gillette need to make the decision?
8. Develop a research question and a corresponding hypothesis about the role of
brand loyalty and price in consumer’s selection of personal care products.