Image Credit: Naotake Murayama
All right, how about a quick show of hands out there. Who has spent any time today thinking about the razer that they use to shave with? I’m suspecting that I’m not seeing very many hands up. Razors are one of those things that just always seem to be there when we need them. When we run out, we generally go out and buy more of whatever brand we had last time. End of story. However, that is just the point – all of a sudden people are starting to think about their razors more and this is not good news for the product managers at the largest manufacturer of razors, Gillette.
The Problem With Razor Competition
It has always been easy to be a product manager at Gillette – they had a very simple product development definition. All you had to do in order to remain the market leader in the razor market was to add more features to your product and then boost your price. However, that darn internet thing has started to change this market. The Gillette product managers have been watching their customers defect and go to internet startups. These companies, such as Dollar Shave Club and Henry’s, sell lower priced blades and razors.
If you take a look at the razor market, what you’ll discover is that Gillette has been losing market share for the past six years. Back in 2010 it had been more than 70% of the market. This is not the kind of thing that you can put on your product manager resume. However, by 2016 its share of the market had fallen to 54%. Gillette is owned by P&G and their sales of blades and razors are important high-margin products.
Gillette’s strategy of creating razors with more features and higher prices had served them well for a long time. However, clearly the loss of market share has indicated that things are changing. What their customers appear to be telling Gillette is that they need them to be more available to them at a collection of different razor price points.
How Gillette’s Product Managers Are Dealing With Competition
So what’s a product manager to do when the competition is taking your market share away from you? What the Gillette product managers have decided to do is to slash their prices and going forward they will be putting a renewed focus on their cheaper products. The goal is to see if this will stop their existing customers from defecting from them to online startups. The price cuts may be as much as 20%.
Currently, refills for Gillette’s men’s razors cost between US$2.00 and US$6.00 per cartridge. Their major competitor sells their refills for between $2.00 and $2.75. The online suppliers of razors provide refills for as low as $0.20 per cartridge. When the lower cost online competition first showed up, the Gillette product managers did not react. What they did do was to continue to introduce new more costly razors. Clearly this was the wrong thing to do.
The results of the Gillette price cuts will be that a four pack of replacement cartridges that had been selling for $19.50 will now cost customers $15. The average price decrease will be 12%. The Gillette product managers have also taken other steps in order to combat the threat posed by the online sellers. Gillette has launched its own online razor service called “the Gillette Shave Club.” People who watch the razor market believe that it’s going to be difficult for Gillette to win back customers from the online vendors because customers believe that Gillette has been overcharging them for years.
What All Of This Means For You
If there is one thing that, once we are past our teenage years, most of us don’t spend a lot of time thinking about its shaving. However, considering how many of us shave every day, perhaps we should spend some more time thinking about this very large market. The Gillette product managers have been doing very well for themselves, but now things are starting to change and so they are going to have to go back and take a closer look at their product manager job description.
In the past, being a product manager at Gillette was simple. You keep updating your product and each time you released a new version, you could raise your prices. However, things started to change when online razor vendors started to show up. They were able to offer their customers a high-quality product at much lower prices. The Gillette product managers started to see their market share start to slip away from them. In order to counter this threat, Gillette has announced that they will be slashing the prices on their products. They will also now be spending more time on enhancing the products that make up the lower end of their product line. The hope is that this will encourage some of their customers to come back and once again buy Gillette products.
We are going to have to see what happens here. It can be very, very difficult to get a customer back once they have left. It’s good that the Gillette product managers have woken up to the threat posed by online vendors. It will be interesting to find out if a large price cut is going to be enough to both get new customers and win back customers who have left.
– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Product Management Skills™
Question For You: In addition to cutting prices, what else could Gillette product managers do to win back customers who have left them?
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