Magazine article Marketing

Mark Ritson on Branding: A Razor-Sharp Strategy

Magazine article Marketing

Mark Ritson on Branding: A Razor-Sharp Strategy

Article excerpt

Gillette's dominance of the razor-blade market means it must drive profitability in innovative ways.

Times are tough for marketers right now, so let me take you away to an oasis of consumer loyalty, where huge margins and a ridiculously dominant market share are the norm. Where private-label is non-existent and your biggest competitor is your second-string product. No, it's not a fantasy. It's the alternative marketing universe occupied by Gillette.

Thanks to years of innovation and heavy investment in marketing and advertising, Gillette occupies perhaps the most dominant position of any consumer goods brand in the UK, with an 85% share of razor-blade sales.

Common sense might suggest that you would sit back and count the half-billion pounds in annual revenues this market share delivers Gillette, however, is owned by Procter & Gamble, and while even the best marketing company in the world can't improve much beyond that level of market share, there are plenty of other levers to pull to generate shareholder value.

First, drive profitability. Market share might have reached its zenith, but that doesn't mean your margins can't be squeezed. One industry insider recently claimed that, despite a pack of four Fusion razor blades retailing for pounds 9.72, the manufacturing and packaging costs for the product are less than 30p. That's a whopping mark-up of more than 3000%. How about that for a margin?

Second, practise positive cannibalisation. Gillette launched its five-blade Fusion line in 2006 with a 30% price premium over Mach 3, its previous three-blade offering. With an 85% market share, it makes more sense for Gillette to focus its marketing on switching its own customers from Mach 3 to the more profitable Fusion line than trying to win any more competitor share. That is why Gillette is spending millions to compete against itself with ads and online comparisons to convince its Mach 3 consumers that their current razor is simply not good enough and to trade up to Fusion.

Third, drive usage. This has always been the number-one way to fuel profitability. In Gillette's case the company is now investing heavily in an online campaign to encourage consumers to use their Gillette razor downstairs as well as upstairs. Videos with powerful messages, such as 'When there's no underbrush, the tree looks taller', are increasing blade-use on the lower body.

One of the joys of an 85% share is that you can run general campaigns to grow total category usage, safe in the knowledge that most of the upturn in sales will benefit your brands. …

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