The History Of The Gillette Company

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The Gillette Company was originated on shaving technology when King C. Gillette created the safety razor with disposable blades in the year 1901. However things were firstly slow during in the first year of manufacture which was in the year of 1903, he traded just 51 razor sets, 168 blades – Gillette recognised he was on the right track. The subsequent year when he was approved the first U.S. patent on the safety razor, sales flied to 90,000 razors and 12 million blades. Launched in the UK in March 2011, the Gillette Fusion ProGlide Series has quickly become the world’s best selling razor, having sold over 2.5 million units within the first 10 weeks in the US, superseding the record set by the Gillette Fusion launch in 2006 . The Gillette Mach3 is a line of safety razors produced by Gillette and introduced in 1998 after more than $750 million in research and development costs. The three blade design is marketed by Gillette as allowing for a shave with less pressure to the skin and with fewer strokes, thereby reducing skin irritation.

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Executive Summary

• Fusion Power is the latest razor developed by Gillette in 2005. It has been designed with a feature of manual or battery power, on the front ¡V 5 blade shaving surface technology and the back ¡V 1 precision trimmer blade. The most advanced laser welding technology was employed to obtain the optimum standard for speed, precision and cleanliness.

• With study viewing that 65% of males still experience shaving uneasiness, Gillette decided to extend its Fusion shaving range with the starter of the razor. Its several high-precision inventions together promise decreased “tug and pull” for men during shaving, So improving both performance as well as comfort.

• The immediate market success of the Fusion razor falls down, in large, to Gillette’s shift towards a more consumer-based marketing strategy. With a unique pre-launch marketing campaign and experiential marketing efforts, Gillette has successfully responded to male consumer skepticism surrounding the launch of Fusion ProGlide, allowing the product to speak for itself.

• By focusing its marketing efforts on the consumer, Gillette has managed to successfully position the Mach 3 Fusion razor across the entire consumer adoption lifecycle. In doing so, Gillette has ensured market growth for the brand moving forwards.

Fusion ProGlide will be launched in the UK during the first half of 2011

In September 2010, Gillette announced that it would be launching its Fusion ProGlide razor in the UK, with the launch likely to take place some time during the first half of 2011. Between 1999 and 2009, the UK blades and razor category has grown 25% to a total value of £317 million. With more than £70 million of this being commanded by Gillette razor launches and $20 million of this market value being attributed by the Gillette Fusion razor, Gillette has recognized the market potential

with the UK launch of Gillette Fusion ProGlide. Gillette looks set to make the UK launch of the Fusion ProGlide its biggest ever marketing investment to date in the hope of topping the launch of its predecessor range, Gillette Fusion, which has been the second largest FMCG launch in UK history. To achieve this Gillette will be launching an integrated multiplatform marketing campaign, which will combine TV, press, outdoor, experiential, and digital activity in order to raise product awareness.

Through this marketing platform, Gillette looks set to successfully build on its strategy of “turning skeptics into believers and shaving into gliding” and begin to establish a more global consumer awareness for its Fusion ProGlide razor.

ANALYSIS

As male interest in priming increases, consumers in this market have become more demanding – expecting on-going and meaningful innovation that caters to their specific needs. Brands such as Gillette have learnt that it is not enough to rely onprevious success to retain market share and that continued innovation is necessary to ensure long term success of the brand.

The Gillette Mach3 is a line of safety razors produced by Gillette and introduced in 1998 after more than $750 million in research and development costs. The three blade design is marketed by Gillette as allowing for a shave with less pressure to the skin and with fewer strokes, thereby reducing skin irritation.

In June 2010, Gillette launched its new Fusion razor with seven new technological advances which that provide men with an enhanced shaving performance and optimal comfort. Within 10 weeks of being launched, Gillette had sold 2.5million Fusion razors. This exceeded the sales achieved by Gillette Fusion in 2006 and in doing so has become the World’s best-selling razor.

To ensure that the new Fusion ProGlide razor appealed to its target consumer audience, Gillette evolved its marketing strategy. Taking on a more consumer-focused approach, Gillette used a unique pre-launch trial campaign, consumer usetesting and experiential marketing efforts to successfully install brand confidence into its increasingly skeptical UK’s male consumer base.

With a greater focus on the consumer, Gillette has been able to successfully communicate the relevant benefits of the Fusion razor to its male consumers. In doing so, Gillette has positioned the Fusion for growth across the entire product adoption lifecycle.

SWOT Analysis

Strengths

Gillette has been well-known for its brand and its market leadership in the shaver industry. In 2000, it had 63% of the US market share in dollar terms, and had been consistently exceeding 60% for the past thirty years, leaving its competitors far behind.

Gillette has its own R&D teams, one located in Reading, England and the other in Boston. The in-house teams enable Gillette to have dedicated and focused effort in designing new products and improving existing products. The responsiveness of the teams was demonstrated in the launch of Good News! in 1976, for competing with BIC¡¦s single-blade disposable razor launched in 1975. The most successful three thin blades in the history are the Mach3 in 1998 which was named winner of the American Marketing.

Weaknesses

It has already been evidenced that customers were switching from cartridges to disposables within Gillette. The fear of cannibalization has created tension among different teams in the company, as in the case of Atra, Trac II and Gillette¡¦s Good News! as opposed to Mach3 and Mach3 Turbo causing split views and less co-operative attitude.

It has taken Gillette more than 5 years to develop Fusion Power. To the rapidly changing demand of customer, it seemed not that capable in keeping up with the pace.

Its long term debt has accounted for 49% of its total liabilities which cost high level of interest expense. Operating cost was at its record high in 2000.

Opportunities

Consumption power of the average people has been raised with the favorable economic trend throughout the year 2000. People were more willing than before to spend money on quality products.

Threats

Although a leader in the market, Gillette should not underestimate its major competitors. Schick was able to produce blades that fit on Gillette razors and BIC shared 45% of the disposable segment in volume terms. Advertising campaigns were planned in year 2000 by both Schick and BIC for $20 million and $16 million respectively. Gillette also faced the challenge of product imitation. The antitrust laws made enforcement of patent rights difficult. Although the competitors tended to share the remaining market portion, this nevertheless hindered the further growth of market share by Gillette.

Research and Development

Gillette liked to think of itself as a giant research laboratory. It spent 2.2 % of sales on R&D, twice as much as the average consumer products company.

Like a pharmaceutical company, Gillette had a product pipeline, the successor to the Mach3 was already being developed.

Almost half of its billion sales in 1997 came from products introduced in the past five years, more than SmithKline Beecham or Johnson&Johnson could boast.

The chairman Mr. Zeien expected to maintain that trend, helped by more than 20 big products launched in 1998 alone.

Growth

Investors had begun to fret about slowing growth, lackluster sales and an imminent change in top management. Gillette Fusion ProGlide looks set to build on its success moving into 2011

The global male grooming market is expected to grow further by 2014

Growth of the UK male grooming market looks set to be a long term trend. Recent estimates from Global Industry Analysts, inc. estimate that the men’s Global grooming market will exceed a global value size of $33.2 billion by 2015. It is

therefore clear that the shifting mind-sets of men towards grooming and beauty products is here to stay, with the male grooming market displaying significant growth potential moving forwards. Although European countries (such as France, Germany and the UK) along with North America continue to dominate the male grooming category in terms of sales, emerging markets such as Brazil and China will play an increasingly important role in driving global value sales moving forward. The promising future growth potential of the developing regions is due, in part, to rising disposable incomes and an appearance conscious culture that prevails, where by men’s desire to optimize their appearance is being fuelled by the culture of competition in the workplace. However, the burgeoning opportunities in the male grooming segment will not guarantee market success for personal care manufacturers moving forwards. As the number of male grooming product launches continues to increase, it will become increasingly important that brands make efforts to align product innovations with male consumer needs. Indeed, a 2011 online consumer survey conducted by the male grooming blog, apetogentlemen.com, has highlighted that the most important factor influencing a man’s choice of grooming product is the effectiveness of the product, with 65.42% of respondents choosing this variable. This was considered significantly more important than factors such as price and ease of use, which highlights the fact that the male grooming market is very much a necessity and results driven industry. Therefore, for manufacturers to successfully capitalize on the significant future growth potential of the male grooming market, it will prove necessary for brands to ensure that product innovations are results-driven, effective and are tailored to meet the specific skincare concerns of male consumers.

In 2010, Gillette once again redefined the male grooming category

Procter and Gamble (P&G), the global leader in the Beauty and Grooming category, decided to extend its Fusion shaving range with the launch of Gillette Fusion ProGlide Series in the UK, in June 2010. This was the first major innovation for the Gillette brand since it was

acquired by P&G in 2005 and has claimed to have made “significant advancements” in male shaving performance and comfort. The new range, which includes a more innovative five-blade razor and four skincare products, hopes to bring together the best of Gillette’s razor technology and P&G’s skincare expertise in addressing male skin discomfort. In doing so, Gillette has confirmed its intentions to stay at the forefront of innovation in male grooming, in a bid to hold onto its three-quarter market share of the US razor and blades category.

Gillette’s new strategy of consumer driven marketing has served to overcome male

skepticism

With the launch of Fusion ProGlide, Gillette’s most expensive razor to date, the brand has made a determined effort to change its marketing strategy. With all of its previous razors, Gillette has failed to directly acknowledge the growing male consumer skepticism that has surrounded each of its product launches. However in 2010, Gillette took on a fresh approach,using consumers to build the brand and reduce male skepticism. Rather than using overt claims of superiority to sell itsshaving products, Gillette placed the Fusion ProGlide marketing campaign into the hands of its consumers, asking customers to try the product and also leveraging the social-media space.

At the core of the brands marketing strategy has been the concept of “turning skeptics into believers and shaving into gliding”, with many of its pre and post-launch marketing programs attempting to communicate this message to consumers.

This unique strategy of consumer focused marketing has enabled the Gillette Fusion ProGlide to achieve strong market sales despite the still somewhat fragile economy and strong competition from the rival Energizer Schick Hydro (a shaving

system priced below Fusion ProGlide).

A unique pre-launch trial campaign helped Gillette to install confidence in its consumers

In order to convince men that the Gillette Fusion technology could make a meaningful difference to shaving comfort and that the brand had not just innovated for the sake of innovating, Gillette carried out several pre-launch programs to prep the market prior to the launch of Fusion razor. In contrast to its usual highly secretive pre-launch approach, Gillette made a conscious decision not to guard the product details of the Fusion prior to the launch.

Instead, the brad decided to be as transparent as possible with its consumers in an attempt to create a more favourable perception of the brand.

Gillette’s consumer focused pre-launch marketing programme included:

• Consumer use testing: Gillette tested the Fusion ProGlide razor on over 30,000 men prior to launch, which confirms that the Fusion ProGlide was preferred by cnsumers at a 2-to-1 ratio over the Gillette fusion range. This enabled the brand to measure the success of the Fusion ProGlide razor in the ‘real world’ prior to launch.

• A unique pre-launch trial programme: Called the ‘Gillette Fusion ProGlide Challenge’, this pre-launch campaign mirrored P&G consumer tests and offered consumers the opportunity to trail the Fusion ProGlide razor in the months leading up to its broad retail availability. More than 130,000 product samples were distributed to consumers via social media outreach as well as websites, blogs and male-orientated sites. All consumers had to do was register at http://Gillette.com.

Marketing Strategy mach 3

Reduce stocks of its Sensor and Atra shavers ahead of the Mach 3 launch.

While most rivals would consider this suicidal, Gillette used this strategy to ramp up prices of new products.

Mach 3 would sell for around 35% more than Sensor Excel, which itself was 60% more expensive than Atra, its predecessor.

Duracell Ultra cost 20% more than a conventional battery.

Chairman Mr. Zeien insisted that premium prices did not matter: “People never remember what they used to pay but they do want to feel they are getting value for money”.

Gillette´s emphasis on refining the manufacturing process was much admired by management gurus. Few companies were as good at combining new products with new ways of making them. It gave a huge advantage over the competition. 75% of the US$ 1 billion spent on the Mach 3 was dedicated to production machinery, tripling the current speed of production. The estimate was that the investment would pay for itself within 2 years.

The fact the company spent more on new production equipment than on new products was one reason why Gillette regularly hit its target of reducing manufacturing costs by 4% a year.

Another difference between Gillette and most other consumer-product companies was it did not tailor its products to local tastes. That gave it vast economies of scale in manufacturing

On the distribution side it usually broke into new markets with razors and then pumped its batteries, pens and toiletries through the established sales channels.

The impact on margins was dramatic: the company´s operating margin, currently a fat 23 % was rising by 1% a year.

Gillette is a global leader, in 1997, 70% of the company´s sales were outside America. More than 1.2 billion people used at least one of its products every day, compared with 800 MM in 1990. The company had sliced into developing markets: it had 91% of the market for blades in Latin America and blades and 69% in India, measured by value. The chinese market was not very attractive for blades and razors, they “don´t need to shave”. Buts offer great potential for Duracell, because of their passion for gadgets such as pagers.

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Mr. Zeien the chairman had orchestrated most of the company´s recent success he had forced to focus on a few world-leading products. He was now past normal age of retirement . The apparent successor was Mr. Hawley had a very different management style. Compared with the clear-thinking, strategic Mr. Zeien, whose ability to communicate had been a hit on both Wall Street and in the company. Mr. Hawley came across rather as a strong operational manager.

Marketing Tactic

Following Tactic Plan is for Mach3.

Product

Packaging is consistent with our premium priced product positioning.

Promotion

To promote of the use of this new razor 5M M free razors will be given to actual consumers of Sensor Excel user and to users of the top Schick razor our main competitor.

Advertising

Will use main mass media: TV, radio, newspapers, billboards. Focusing on prime time hours and programs.

Public Relations

The plan will concentrate on interviews on TV, radio, newspapers and magazines focusing on the significant genuine improvement of Mach3 razor which provides a state-of -the-art shave with the objective of minimizing the effect of the high price.

Merchandising

4 ALTERNATIVE MARKETING STRATEGIES

4.1 Mass Marketing

Product will be launch as a premium product with rapid skimming strategy. No discounting will be allocated, as the product is one of his kinds. Both factories will be built simultaneously to ensure maximum production to capture the market. For the existing products Mach3, Mach3 Turbo, Senor, Atra, TracП and disposable will remain unchanged.

4.2 Differentiated marketing

Product will be launch as premium product but with different pricing strategy base on geography. No discounting will be allocated, as the product is one of his kinds. First, the factory located in United States will be build and once the West European market is ready, the second plant in Poland will follow. This will lower our capital investment risk but most likely will affect the market share. For the existing products Mach3 Power sales promotion will be adopted to maintain market share and brand awareness.

http://images-its.chemistdirect.co.uk/Gillette-Mach-3-Turbo-1-Up-Razor-181911.jpg?o=5RQlaLY8GqkmbvcjFRUfsFOP1DUj&V=bd07

5 SELECTED MARKETING STRATEGY

At a different angle, Fusion Power is a product design for one market segment but the segment is so large. It is almost the whole market. Therefore, we should adopt the mass marketing strategy and in corporate the niche marketing strategy together. Also, Fusion Power had the greatest technological advances (16 different patents). It is almost impossible for the competitors to imitate in a short period this time.

The product will launch base on a mass marketing strategy and the global advertising campaign will launch base on niche marketing strategy simultaneously but it will pin point the different buying behavior in US and European market. The campaign will pummel weaker competitors into submission and leaving Gillette in near-total control of the market.

For the existing products Atra and Trac II is already in the decline stage but both system continue to hold sizeable share positions worldwide. The impact on cannibalization is minimal. For Mach3 Power, it is very different as it is still in the growth to mature stage. We expect Mach3 Power will continue to growth in the next three years. However, option is limited and sacrifice is necessary. Mach3 Power will eventually become a secondary product in order to make way for Fusion Power. The price will remain unchanged for the next two to three year and sales could drop due to customers switch to Fusion Power at the early stage. If necessary, Mach3 Power could be use as a tool to create a price war directly with the competitors for a 3 to 6 months period. Alternative, same principle can be adopted as special marketing campaign in the development market to encourage customers to switch to more quality blade and razor product.

As disposable is not Gillette target market, existing product will continue but all related development will be suspended.

5.1 Pricing Strategy

Facing keen competition in the industry, Gillette adopts premium pricing over quality while it plans to launch the product, Fusion Power into the market. The premium price is required to let its customers to differentiate the Mach3 Power from its competitors¡¦ product and at the same time to generate sufficient cash flow to cover the variable production cost and huge amount of advertising and R&D cost.

To better understand pricing strategy of Gillette, we should realize the pricing / quality strategy adopted by Gillette in the price setting process.

Price

High Medium Low

High 5.1 Premium strategy High-value strategy Super-value strategy

Product Quality Medium Overcharging strategy Medium-value

strategy Good-value strategy

Low Rip-off strategy False economy strategy Economy strategy

The target markets of Fusion Power are men of over 30, whom are affordable of paying higher price for better product. With specific product feature of Fusion, premium strategy of setting higher price for delivering this high quality value to customers is adopted.

Importance of using consistent pricing strategy in different geographical locations is critical in hitting the right market segments. However, different sales promotion or advertising may be required for penetrating different location markets as elasticity in these markets may also be different. Majorities of US men, whom are price sensitive, are using Disposable product. Appropriate advertising is required for them to change their practice, on the other hand, European market is easier to penetrate as they prefer quality product.

For setting the price in different market, Gillette is also required to consider the currency effect in different markets. It is also subject to market risks of being exposing to changes in currency and interest rates in different locations. It regularly assesses these risks and has established business strategies to provide natural offset, supplemented by use of derivatives financial instruments to protect against the adverse market risks.

5.2 Promotion

In the introductory phase of launching Fusion Power, marketing management of Gillette can set a high or a low level for each marketing variables (price, promotion, distribution and product quality). Considering factors of price and promotion, rapid skimming strategy is adopted. Gillette charges a higher price to recover as much profit per unit as possible. It spends heavily on promotion to convince the market of Fusion merits even at higher price. The higher promotion acts to accelerate the rate of market penetration.

This strategy makes sense when a large part of the potential market is unaware of the product (in US market); those who become aware (in European market) are eager to have the product and can pay the asking price. Gillette, being faced keen competition, wants to build up the brand preference through this premium pricing also.

Promotion

High Low

Price High Rapid skimming strategy Slow skimming strategy

Low Rapid penetration strategy Slow penetration strategy

Gillette decides to launch its Fusion product both in US and European market simultaneously. It must well realize the different buying behavior well in order to design appropriate advertising and promotion program to hit its market. From the statistical data, it understands that their promotion program should be designed to influence the feeling of US men that it is the right time to switch from using Mach3 or disposable to Fusion which is of higher quality.

US men whom with age of over 30 are used to using disposable dust more promotion booths are required to set at major cities for a longer period of time to let them realize their necessity in changing their behaviour. As most of them are price sensitive, promotion program should be first designed and taken up by aggressive sales force. Appropriate incentive should be considered at the beginning stage. Heavy advertising by spending money to create strong customer preference and awareness of the new product is required. Free trial use of Fusion Power is also an alternative to draw their awareness.

For European market as most customers prefer on using high quality product. Fusion can hit this market well with promotion program of informing them well the launch of this product. As for both market, TV advertising program is critical to pass the message.

CONCLUSION

Product innovation is one of the key factors for business to growth and profit in today business world. In 1988, Gillette senior management already believed in product innovation. Furthermore, global advertising is the way of the future. This is why Gillette must launch ¡Fusion Power¡¨ in 2005. The other reason that Gillette must launch Fusion is the long term debt that accounted for 49% of its total liabilities. As a result, it leads to high interest expense. Therefore, Fusion will be the most advance weapon Gillette had to fight back and pummel the competitors. .

The market segment for Fusion is male over 30 years old with health financial background which care great deal about closeness, comfort and appearance. Because of this and Fusion is one of his kind products, we adopted the premium price strategy. For promotion, rapid skimming strategy will be deploying together with global advertising. Fusion Power will be distributed through supermarket chain around the world. The product will pack in a ¡state of the art¡¨ premium packing.

This marketing plan will been successful because of engender strong customer loyalty and perceived to be the best by consumers as a result of global advertising campaign. The command premium pricing due to technical leadership and a high profit margin return will ease the pressure from disgruntled shareholders and reduce the long term deft. Finally by launching Fusion Power, Gillette had further developed in growing global categories.

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