The Gillette Business Model Becomes Ever More Transparent
Posted by Ned Colville on September 8, 2009
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Many is the time when I’ve been in a workshop when some knowing business sage pipes up with the Gillette analogy. This is usually accompanied by a wisdom-infused statement along the lines of: “Well of course, it’s just like the Gillette model – they more or less give the hardware away as an investment and then sit back and watch the money roll-in, as the consumer repeat purchases the high margin blades.”
Of course these gurus are absolutely right – it’s a fabulous business model as demonstrated by Gillette’s unrivalled success and rightfully deserving of its place in classic (if somewhat over-exposed) “brand-analogy-ville”, along with Dove, Lucozade, Lynx/Axe, Disney, Innocent, Ford Model T etc. etc. etc…Incidentally, in the past (and no doubt in the future) I’ve been as guilty as any of adopting the aforementioned business sage status whilst citing examples with which almost everybody in the room is familiar – for which I apologise!
Anyway, my main point is that up until now, “Gillette have ’more or less’ given the razor handles away” – in exchange for 7 or 8 quid. But now it seems that we’re all going to have to change our patter to “Gillette actually give the razor handles away”…
My experience of this offer was on Sunday afternoon when the doorbell rang and I was greeted by a smiling promotions lady who explained the deal – swap your old Mach3 for a new Fusion. Now I’ve been smugly resisting Fusion since launch – after all, I told myself as I reached for a considerably more reasonably priced pack of Mach3 blades, I knew the business model and I wasn’t going to fall for it, no way. But here on my doorstep was something “free”. I agreed immediately and fetched an old Mach3 handle from the bathroom cabinet, making sure I had a spare one, “just in case”.
Despite the “give away the hardware” business model being so blatantly transparent, my view is that they’ve made absolutely the right call:
1. People cannot resist something that’s free (myself included)
2. If you really believe that your product offers superior functionality, trial is your main barrier (I tried the Fusion, it’s brilliant – it blows Mach3 out of the water)
3. The investment will be paid off almost immediately (blow the cost and the fact that I retained a Mach3 handle, I’m never buying Mach3 blades again)
4. My “loyalty” has been rewarded and I’ve been retained – as market leader, cannibilisation is inevitable but if it’s at higher margin then it’s not a factor
5. Marketing people all over the world can now cite the Gillette business model analogy with even greater conviction!