“The greatest feature of the business is the almost endless chain of blade consumption,” said Gillette, “each razor paying tribute to the company as long as the user lives.”
From day one, Gillette understood where his company’s success was going to come from. As proud as he was of his uniquely designed razors, Gillette knew that his profits were always going to come from selling the blades. It was in those disposable razor blades that the perfect simplicity of his business model could be found.
When Gillette was first starting out, he sold his razor blades in a package of 20 for $1. As the company grew, he increased the blade prices by including just a dozen in a pack for the same price of $1. Customers did not have a choice; if they were going to use a Gillette razor, they would have to buy the accompanying razor blades.
But Gillette did more than just raise his prices. He did not want his customers thinking they would be getting the same thing, only for more. He set out on a marketing scheme that distributed a message of improved quality and appearance. “We hope to have a better blade,” he wrote, “and have it machine polished, which will improve its appearance very greatly.” Yes, Gillette told his customers, they would be paying more. But they would also be getting more in return. In the end, Gillette’s strategy worked and would be copied by companies to come.
Gillette also understood the importance of that very distribution process. Early on, he switched the company from operating through a mail order network to a dealer network in order to capitalize on the large numbers of potential customers. However, he was also sure to keep a close eye on his retailers. He had to make certain that his expensive razor at $5 a pop was not discounted.
Since the passing of Gillette, however, the road for the company that he founded has begun to slide down a slippery slope. While still ranked as one of the world’s most valuable brands, Gillette began to experience problems after its founder was out of the picture. As the company continued to expand its line of disposable products, so too did it suffer being pushed downmarket. Gillette had always made sure that his company stood for premium quality goods. But as more and more cheap disposable razors came on the scene, Gillette was forced to compete.
The value of Gillette’s initial product was that it was both cheap and of good quality. Indeed, he could risk raising the prices of his blades because he was simultaneously boosting their quality image. But in later years, the company’s image gradually became associated with cheap products. Gillette understood where the value lay with his product; the price was good, but the product was perceived as being even better. When one of those variables got altered in exclusion of the other, the results – in the form of dropped sales – spoke for themselves.
Lesson #3: Know Where The Value Of Your Product Lies
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