The maturity of an industry has brought a company swimming in a red ocean, which means price war strategy, according to a bestseller book titled Blue Ocean Strategy that is written by W. Chan Kim and Renee Mauborgne. This situation influences the way a company evaluates its strategies and effectiveness regularly. Each company has a particular business culture, which is suitable only for the company in a specific industry. This condition may not be suitable when the industry changes or the company is acquired by another company at bigger size.
There are some conditions that influence how companies take care of competitive markets. They include strong corporate culture, employees learning and development attitude, management long-term vision, situation in a particular market, and competitors’ strategy, to name a few.
This condition occurs in Gillette, the leader in razor and blades market in the world, where they currently face the maturity of the industry and get stuck in the old-fashioned strategy. Many times, they commit a product innovation on continual basis as a means to position Gillette as a leading company in the razor and blades market. Unfortunately, their main competitor, Schick-Wilkinson Sword, also responds the competition by innovating products in terms of number of blades in a single razor.
As Gillette makes more profits from the blade sales rather than initial razor purchase, the company needs marketing innovation rather than product innovation. Concerning this issue, this paper will elaborate Gillette’s product innovation, the battle with Schick, and recommendation for improving its leadership in razor and blades market.
Product Innovation at Gillette
One common strategy in facing competition is to nurture product innovation. Sometimes, the idea to develop a new product comes from an observation of previous products and leads to the improvement of product value. In addition, a traditional market research states that product innovation usually starts with consumer complaints, product fault, the identified gap that the product has not match, or merely the company sees the need to create new segments in a market.
The product development at P&G, the parent company of Gillette following the $57 billion acquisition in January 2005, is carried out by retrieving information of consumers’ habits and behaviors (Isidore, 2005). For example, in developing the soap and detergent products, P&G carry out several tests using various models of washing machines to understand what kinds of detergent families would prefer. The information that obtained in the tests would then be used as a basis for the improving product designs. Similar product development steps are also done for the improvement of razor and blades product under the brand Gillette.
However, Adrian Slywotzky, a consultant at Mercer Management Consulting reveals that in many cases, a company relies on the sustaining innovations model, improving existing product for existing market, instead of completely new product breakthrough (The Economist, 2004). This product innovation model is in line with the P&G core capability in design improvement (“Lafley on Design,” 2003).
The razor and blade war between Gillette and Schick-Wilkinson Sword seems to put Gillette in the end of product innovation in the shaving market. But, the competition does not merely the product things but could be leveraged to battle in marketing aspects such as distribution, promotion, and pricing. In terms of product, there are still rooms for Gillette to develop their razor and blade products taking benefits of P&G multi line products that could be bundled to enrich the offering. To nurture the new product innovation, Gillette can design an active system to support innovation. Despite depending on researches to discover improvement possibilities, management must realize that most innovation opportunities are found by individuals who are closely tied to products and consumers (Hale, 1996; Markgraf, 2000).
From distribution aspect, the innovation could be nurtured by taking benefits of current distribution practices that are proven to favor P&G in winning the consumer goods industry worldwide.
Battle between Gillette and Schick
The battle of one-upmanship between Gillette and Schick also happens in any other industry where few companies dominate a market of particular products. The reason to perform the one-upmanship model is the company considers that their products have a particular lifetime, which raises the need to improve or even change the design, features, and product benefits. This so-called product life cycle also help the company to manage product in respond to some factors such as customers’ demands, technological changes, amendments in regulation, and many others (Kotler, 2003; Internet Center for Management and Business Administration, 2004).
In Gillette case, it is obvious that Gillette compete in the increasing number of blades with the competitor, Schick-Wilkinson Sword. This battle is obvious as each entity strives for introducing new blades products such as Gillette’s 3-bladed product, Mach3, which is responded by Schick 4-bladed Quattro and later countered by Gillette 5-bladed Fusion (Cengage, 2011).
So, in Gillette case the battle of one-upmanship is still valid and effective as customers still value the product innovation of razor and blades as the way of improved product benefits. Still, there is still a room for improvement for Gillette, considering that P&G has the most advanced and sensitive market research in the world. One of those methods was the in-situ method. The method is carried out by appointing P&G’s research personnel to visit customers’ homes and make appropriate observation of their daily activities. By doing this, Gillette can develop the demanded products that further become the market
The razor and blade market continue demanding for new innovative products that would solve the customers’ hassle in shaving experience. Therefore, the opportunities should be captured by continuously producing new products out of the battle for number of blade. Another sustainable strategy to keep close with the customers is to encourage P&G employees to sensitive toward possibilities of improvements.
This is important as many valuable innovations often came from employees’ ideas. In addition, each customer relation personnel should be trained to be sensitive toward customer’s needs and report to higher management as possibilities of product improvements were founded. In this situation, P&G should design a competitive environment to encourage innovation juice not only in research and development department but also throughout the company.
Second aspect that is recommended for Gillette is to nurture the innovation in distribution. Taking benefits of existing P&G distribution networks, it should be no hassle for Gillette to be anywhere at the right price. The common view sees P&G as a pool of brands. They are known more by their brands than they are as a company. This condition could be implemented in razor and blade product line by inventing new brands for specific segment. For example, for youth market, Gillette could develop new brand that represents their characteristics.