Monday, October 04, 2010

Gillette's 34-Cent Razor

I love a good marketing success story, and Friday's Wall Street Journal showcased what may become a terrific one at Gillette.

Gillette, now part of Procter & Gamble, has developed a 34-cent razor with an accompanying 11-cent blade for its Indian markets. The current price of a Mach 3 blade in India is about $2.25. Quite a stunning change in price points. And, as it turns out, product features.

Gillette intensively studied Indian consumers with respect to their preferences for shaving items, and determined that, given distribution channels, product feature needs, and price points, a dramatically downscaled razor and blade were required.

As the article states,

"The price takes into account not only consumers but the kiosk owners who serve most shoppers in developing markets. The lower cost will encourage more small store owners to stock up on the item.

To cut costs, P&G eliminated the lubrication strip and colorful handle designs Indian men weren't willing to pay for."

It is stunning to me that a global consumer products company will actually shift from a blade price in the $2 range to one costing about a dime. Such scale of change in revenue at such low prices suggests how serious P&G is at moving its current 10% share of the Indian market up toward its global average 50% share. It's amazing that they plan to make money, to prosper, on 11-cent razor blades.

More interesting are these closing passages,

"P&G will introduce Gillette Guard first in emerging markets, says Mr. Carvalho, who doesn't rule out the possibility of bringing the cheaper razor to developed markets like the U.S. "We haven't yet looked in a detailed way if it makes sense doing this in developed markets," he says, "We'll probably know that in the next six to 12 months."

That could really make for interesting consumer reactions in the US, where, as the article also notes, recent advanced Gillette razors sell four for $16.99.

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