21st sep, 2010

The Gilette story retold

One of my readers, Arturas, Tipped me on a great paper examining the myth of the Gillette business model. 

The traditional Gillette story is about Gillette gaining its market share by giving away some of its products for free and charging for the rest. The paper by Randal C. Picker analyzes what went on behind the myth. 

The interesting part is that Gillette leaned heavily on patents the first 17 years of its lifetime and it was only when they ran out that they were forced to reconsider the strategy that was already feeding their monopoly. An interesting point is that it is somewhat surprising that Gillette has been able to maintain their “monopoly”. The product itself does not tie the customers in…the expensive blades are disposable and customers could easily change. So why don’t they? Is it all brand power and marketing? Is it quality? 

The paper doesn´t give the answer but is a very interesting read. It also indicates that the “razor and blades” strategy probably won’t work in many other areas. Telephones and game consoles are examples in the paper. Here the customer paid for the hardware and the games, so there will be switching costs. The result in the game console industry has not been that consumers choose one console but two and buy fewer games for each (but a similar total of games). That must be causing the console producers some headache.

Did you know that name the inventor of the Gillette razor was : King Gillette – very fitting

Responses

Glad you liked it. Well-written summary!

Leave a response

Your response:

Categories