Apr 28, 2014
Why Gillette’s New Razor Is Good for Procter & Gamble
This article was originally published in Bloomberg Businessweek.
On April 29, Procter & Gamble (PG) plans to launch its latest shaving innovation—a razor with a swiveling-ball hinge that enables the blade to pivot. Gillette’s new FlexBall technology is akin to that used in the Dyson Ball vacuums, letting them turn on the spot to maneuver easily around obstacles.
This is the first time in Gillette’s recent history that it has introduced a new razor without developing a new cartridge. The technological advances of new razors—Sensor, Mach3, and Fusion—mostly came from improving the blades and increasing the number of blades in a cartridge. The change in Gillette’s strategy has been viewed as a departure from the classic “razors-and-blades ” model by which a company generates most of its profits from selling supplies (cartridges) designed to be uniquely compatible with the company-offered product (razor). This, however, is not the case.
The “razors-and-blades” model is alive and well and remains the driving force behind Gillette’s profitability. One of the reasons for focusing on innovating the razor itself rather than the cartridge is simple: Following years of continuous improvement that culminated in the introduction of Fusion ProGlide in 2010, performance improvements that matter to customers are becoming increasingly difficult to achieve.
Economists refer to this as the principle of diminishing marginal value. In Gillette’s case, the current cartridge/blade technology already suffices, so further improvements would have to be rather dramatic in order to be meaningful to—and appreciated by—buyers. The logic naturally leads to a focus on innovations in areas in which the company can spark consumer excitement and have the greatest impact on people’s shaving experience. Hence, the FlexBall razor.
Notwithstanding the swiveling-ball hinge’s benefits, the new razor is unlikely to solve one of Gillette’s key challenges—its price image. Many consumers consider Gillette razors and cartridges overpriced. The slightly higher suggested retail price of the new razor might reinforce this belief. To retain and expand its customer base, Gillette must persuade buyers that the cost of its cartridges—which, according to the company, is $1 a week for most men—is comparable to that of such competitors as Dollar Shave Club.
It is unlikely that most men will rush to replace their existing razors because the improvement in shaving is not dramatic. Nevertheless, the new razor will provide new customers with a better shaving experience, giving Gillette a competitive edge. After all, the success of the razor-and-blades business model hinges on having the best-a-man-can-get razor.