Let me take you away to an oasis of consumer loyalty where huge margins and a ridiculously dominant market share are the norm. Where private label is non-existent and your biggest competitor is your second string product. No, it’s not a fantasy. It’s the alternative marketing universe occupied by Gillette.
Thanks to years of product innovation and heavy investment in marketing and advertising, Gillette occupies perhaps the most dominant position of any of the major global consumer goods brands with an estimated 70% share of the global razor blade category. Common sense might suggest that if you found yourself in this envious position you would sit back and count the billions of dollars in annual revenues that this market share delivers. But Gillette is owned by P&G, and while even the best marketing company in the world can’t improve much beyond that level of market share – there are plenty of other levers to pull to generate shareholder value. And those levers provide brand managers with a vital, best practice lesson in growing a brand’s contribution even when market share remains constant.
First, drive profitability. Market share might have reached its zenith, but that does not mean your margins can’t be squeezed. And squeezed tight. One industry insider in the UK recently revealed that despite a retail price of £9.72 for a pack of four Fusion razor blades, the actual manufacturing and packaging costs for this product is less than 30p. That’s a whopping mark-up of almost 3000%. How about that for a margin?
Second, practice positive cannibalization. Gillette launched its five bladed Fusion line in 2006 with a 40% price premium over Mach3, its previous three bladed offering. Despite the fact that both lines generate significant profits, with such a huge share of the shaving market it makes more sense for Gillette to focus its marketing resources on switching its own customers from Mach 3 to the more profitable Fusion line than trying to win any more share from competitors. That’s why Gillette is now spending millions to compete against itself with ads and online comparisons that attempt to convince its Mach 3 consumers that their current razor is simply not good enough and to trade up to Fusion. A year ago Fusion started a TV campaign called “Nudging Disciples” in which ads argued that “five is better than three,” referring to the different blade counts of Fusion and Mach3. The spot shows Tiger Woods, Derek Jeter and Roger Federer literally knocking Mach3 razors out of men’s hands with a golf ball, baseball and tennis ball, respectively. “Sometimes you need a little push to let go of your Mach3 razor,” the narrator says. While it may seem crazy to spend millions to compete against yourself, the margin differences mean that this will deliver a better ROI than targeting the small number of remaining non-Gillette consumers over to the brand. Targeting existing customers is usually easier and the conversion rates are better.
Third, drive usage. Don’t fall in love with steps one and two that I listed above. They are good tactics, but don’t make the classic marketers error of overlooking the easiest and most powerful driver of profitability. It might sound less sexy than increasing share or price point – but believe me – increasing consumer usage of a brand has always been the number one way to fuel profitability. Get consumers to stay with a brand for longer. Persuade them to use it just a little more. Find an additional application. All simple but powerful ways to drive increased sales from the same stable market base. In Gillette’s case the company is investing heavily in an online campaign to encourage consumers to use their Gillette razor downstairs on the lower body area as well as upstairs on the face. Interactive videos with powerful messages like, “You might say when there’s no underbrush the tree looks taller” are increasing the frequency of blade use on those thicker, more stubborn lower body regions. One of the joys of having a 70% global share is that you can run general campaigns to grow total category usage like this campaign, safe in the knowledge that most of the upturn in sales will benefit your brands.
Fourth, don’t just sit there. Extend the brand! You have a billion dollar brand equity – use it to enter and take control of other related categories. For Gillette that has meant a successful foray into the “software” side of shaving with up to a 50% share in the shaving cream category in many countries and a growing slice of deodorants and shampoos too.
Finally, stay frosty. Today’s market dominator could end up being tomorrow’s has-been brand. The vast majority of spend on consumer goods marketing is spent defensively to maintain share, not grow it. No surprise therefore that Gillette is one of the brands linked to the hottest TV series of 2009 – the second series of True Blood from HBO. Their fictional tie-in campaign shows a vampire endorsing Fusion as the best shave for the undead. It will deliver a huge amount of defensive awareness while keeping the brand contemporary and hip in the never ending battle to stay fresh.
So take some comfort with your shrinking share, puny margins and tiny marketing budget. You think you have it tough? Look how hard Gillette has to work with 70% share, 3000% mark up and no real competition. Who said brand management was ever easy?
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