Most everyone has heard about the razor/razor blade business model. But a recent set of Gillette TV commercials has me wondering if Gillette has taken that model too far.
Back in 1901, King Gillette had a business breakthrough when he came up with his business model of selling safety razors. He would sell the razor once, but it was the disposable blades that people had to keep buying over and over where you really made your profits.
This became known as the “Razor and blades” business model, and you can see it in many industries. For example, wireless companies gave away millions of cell phones for free because they knew they would make the money back on the call plans.
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But today I’m going to talk about the razor and blades model, with actual razors and blades.
First, a quick history:
For many years, Gillette and Schick battled back and forth with claims of having the best razor. In 1998, Gillette came out with the Mach3, the first triple-blade cartridge razor.
Five years later in 2003, Schick responded with the Quattro, the first four-blade cartridge razor. In 2004, The Onion came out with a foretelling article predicting that Gillette would not match Quattro’s 4 blades, but rather say “F*** Everything, We’re Doing Five Blades.“
Their vision was right on target, as Gillette released the Fusion Model in 2007 with, you guessed it, five blades. According to Gillette it cost less than the $680 million it spent to develop the Mach3. So what does that mean… $500 million dollars? That’s a lot of cash.
But my point today is to look at the two commercials that they are currently running.
1) Gillette Champions: Step up to Fusion Power
YouTube Video: Step up to Fusion Power Commercial with Tiger Woods, Thierry Henry, and Roger Federer.
This ad features Tiger Woods, Roger Federer, and Thierry Henry, a trio who no doubt didn’t come cheaply, hitting golf balls, tennis balls, and soccer balls into the face of men that are shaving with the Mach 3.
No longer are they convincing people to change from Schick to Gillette, they’re telling their own customers that the Gillette blade they’re using isn’t good enough.
The tag line is: “Sometimes you need a little push, to let go of your Mach3 razor, until you discover Gillette Fusion Power.”
Really? Are they that cocky or is Schick no longer considered a competitor? I mean, I understand the concept of pushing customers along an upgraded product line. For example, my first Apple purchase was an iPod. I enjoyed the iPod, I stopped into the Apple store to look at new iPods, and while I’m there I check out the Macbooks.
Eventually, when it’s time to buy a new computer, I will also consider a Macbook. Then, when I’m happy with my Macbook, I’ll consider their new iPhone. But at least these are complementary products.
BUT THIS IS ROGER FEDERER HITTING A TENNIS BALL INTO THE MAN’S FACE AND EFFECTIVELY SAYING “DON’T USE THAT GILLETTE PRODUCT WHICH YOU ARE HAPPILY USING, USE A BETTER ONE INSTEAD.”
What other ad campaign did this agency work on??? A man is happily driving down the street in his Honda Civic, and then he stops at a light and Mike Tyson opens the door, drags him out of the car and punches him in the head and tells him to upgrade to the more expensive Honda Accord?
2) Talking Blade
The second type of commercials they are running are urging consumers to replace their blades more often. In one called “Talking Blade,” an animated razor tells its owner that he has to change the blade more often (thus effectively committing cartoon suicide, as the guy ejects him into the trash). The tagline is “Fresh Blade, Better Shave.”
Gillette Video: “Talking Blade” commercial.
A similar commercial called “Money well spent” urgently tells users that you can shave for only $1 a week.
So what’s going on here?
Well, it’s very clear to me what’s happening, because I’ve done it myself. There are 2 key factors:
1) The blades have gotten very very expensive
2) The blades have improved greatly in giving a great shave.
The result of this is that I am stretching the amount of time I spend in between replacement blades, sometimes weeks longer than I used to.
This has to be freaking Gillette out.
I would love to see a stat that shows the average number of times a man uses a blade vs. the cost of the replacement cartridges. I have to believe Gillette has this, and the correlation is that the more expensive the blades, the more likely a guy is to say, “You know, it’s getting a little dull, but I bet I can get another shave or two out of it.”
That’s also why these commercials are highlighting the built-in indicator strip that turns color over time, telling you when to switch to a new blade. Hmmm …. I wonder what the accuracy is like on that thing. Do you think that is more likely to encourage you to change your blade a little bit BEFORE it’s time, or after.
Do the numbers bear out this theory? Yes.
Note… for comparison, I’m going to use the battery-operated “Power” version of these two models, and look at retail prices, not sale prices. Prices vary dramatically so you want to make sure you get your blades on sale. You don’t know how frustrating it is to run out and need to buy blades and are forced to pay full retail.
When looking at the cost of the Mach3 Power vs. the Fusion Power, they both run about $12-$14. So in other words, the razors themselves are about the same.
But in looking at the blades, in comparing the retail prices at 4 locations, an 8 count of Mach 3 Power runs about $23.50 while an 8 count of Fusion Power runs about $28.75. With tax that’s $30 for an 8 count!
Breaking it down and rounding off, that’s $3 a blade for the Mach 3, and $3.50 a blade for the Fusion.
Why is Gillette a) competing with itself and openly telling people in their ads to upgrade and then b) replace their blades more often?
Easy… just do the math on an extra 50 cents of revenue per blade for each man they can convert, every time he shaves, over a lifetime. Big money.
Let me end this rant by saying something that might surprise you. I LOVE my Gillette Fusion Power razor. The shave IS the smoothest ever. I NEVER ever cut myself. And while I’m not happy to shell out $30 for replacement cartridges, by extending the number of shaves a bit and catching a sale, I understand that in a way I am subsidizing the half a billion dollar R&D effort they expended to fit all this technology into such a neat package.
I just don’t know how they’ll top it. Six blades? Seven? Do I hear double digits?
Are we heading toward a package of replacement blades hitting $50? Either way, King Gillette would be proud.
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May 24th, 2009 at 12:48 am
I recently switched to an old fashioned shaving system complete with just one razor blade instead of 3-5, and it’s a really good shave and cheaper in the long run too. You just have to buy really cheap razors, not the plastic thing that holds the blades too.
I’d bet that the razor companies will eventually compel people to look at some alternatives. The price of those multi-bladed things are ridiculous.
Good article.
June 23rd, 2009 at 5:49 pm
I use the Gilette Sensor (2 blades) and have for years. I see no reason to switch to anything else. If they want me to upgrade, better stop selling the cheaper alternative, because that’s what I’ll buy until it’s no longer available.
August 12th, 2009 at 9:04 pm
All this demonstrates why I bought a $30 safety razor and high-quality stainless steel blades (I like Merkur from Deutschland).
You only need 10,000 blades IF they suck. It’s like wielding (Mach) 5 Frankish blades when what you need is one curved Damascus blade.
August 12th, 2009 at 9:33 pm
It’s only a matter of time before Gilette announce a razor that has all the functionality of a 5-blade system but implemented with 1-blade!
August 12th, 2009 at 9:50 pm
Thanks for the comment Jason. I could definitely see some combined form-factor.
August 12th, 2009 at 10:35 pm
I don’t see how you can say the numbers bear out your theory, when all they show is that Fusion cartridges are more expensive than Mach 3. This is obvious; the Fusion has 66% more blades! As I understood it, your theory isn’t that Fusion cartridges are more expensive, but that men are replacing them less often due to cost. That would be a difficult thing to measure (perhaps look at ratio of number of shavers sold to number of cartridges sold for both Mach 3 and Fusion).
I would suggest that the decrease in frequency of replacement isn’t enough to offset the increased price of Fusion cartridges. If it were, then Gilette would have no reason to encourage men to switch.
I second your opinion that Fusion is an awesome product. Fusion is a big step up from Mach 3, which was itself a big step up from older models.
I also think the lower cartridge replacement frequency for Fusion isn’t strictly due to cost. I believe the Fusion cartridges actually provide a higher number of shaves before they become unacceptably dull.
August 13th, 2009 at 12:25 am
Hi Andy… It’s difficult to hone in on the theory without hard numbers from Gillette, so I’m primarily going from my experience of replacing less frequently, and then noticing that the commercials seemed to be urging me not to do so. Maybe it is true that the Fusion cartridges work more efficiently than the Mach 3, and thus they can justify charging a higher price for a better product.
Whether it’s getting a haircut, buying a new set of tires for your car, or upgrading your laptop, there are lots of areas in life that businesses can argue that you NEED to ‘upgrade’ for a better experience — and they could be right. But the consumer can always counter-argue that they can get by for another week, month, or year just fine.
Thanks for the comment
August 13th, 2009 at 1:27 am
Is there really any benefit to the Fusion over Mach 3. I tried it and didn’t notice any difference.
Then again, I’m fine with just the cheapest disposable, with no foam or anything. I never cut myself, and this talk about smoothness is baffling! It probably works out cheaper even if you only use them once.
But, Gilette do a good marketing job (and it sems a good product too). For if people like you do get some real benefit from them, there must be many more that just use it because it is the default choice. Now they want to push a more profitable product into greater prominance. (otherwise why would they bother?)
August 14th, 2009 at 4:27 am
Great post.
My guess is that the reason they compare the new product against their own blade rather than their nearest competitor is to keep them out of hot water (crappy pun intended). There is no scientific measure of “close shave”, so no matter how scientific they make their adverts look there is no claim they could make to both get past the regulator (in the uk at least) or avoid a lawsuit.
I wonder how a new entrant would compete? Would they go for 1 extra blade or something else? Could you offer a $150 shaver with free lifetime replacements and undercut the market?