Amazon, Apple, Sony in fact Airtel and Jio and Gillette do you know what’s common about them ? Only one thing – this companies use same business model due to which we become slaves of this companies. The question is what’s that business model ? And how smartly these companies use this business that you or me, both of us can’t stop buying products. And most importantly, what are those business lessons we can learn and implement in our business ?
Table of Contents
How Gillette Started
So Gillette Billion Dollar Business Model starts in late 1800s. The shaving trend started recently. But there is one problem. Shaving was considered a tough and dangerous activity. B’coz none of the man had expertise in shaving. If you go back in olden times, two types of razors existed.
- Straight Razors were very sharp and risky to use.
- Safety Razors were less sharp and dangerous but there was a problem. The problem was that after buying them you need to sharpen its blades regularly.
Tired of this problem, King Gillette – a travelling salesman designed a razor blade with detachable blades. When blades get old, remove them, insert new one and shave. And from here Gillette company started.Today Gillette is among top brands of the world.
But do you know that when Gillette came to India it badly failed ? But if you look at today’s scenario, then Gillette is dominating world’s razor market. But the question is how Gillette did it ?
How Gillette is dominating world’s Razor market?
So the answer is Consumer Relevance. So in 1921, Gillette’s razor design patent got expired. After this many companies started making razors like Gillette. A company which was dominating market since 15 years saw it falling. After the entry of many competitors, razor’s sale decreased. Sales dropped too much that it started making losses. But Gillette does something that in 1923 their revenue doubles and profits become 4x. So Gillette introduced a new business model in market which was named – The Razor Blade Model
How Razor Blade Model worked?
After Gillette’s consumer study they found that people liked their products But due to many competitors in market people had no reason to buy only Gillette’s product. And so Gillette reduced it’s razor’s price too much that people used to think it a bargain offer. This made people compelled to buy Gillette’s products. The question is if they reduced prices then how their profit turned 4x ? And here comes Razor Blade Model. Gillette made it’s razors cheap but blades expensive. So people didn’t thought before buying razors. They bought razor they too will need blade so they came again to company to buy blades. This created a massive revenue stream for Gillette.
Today many big companies like SONY, Amazon, Apple, Airtel, Jio use this model. Do you know SONY sells it’s PlayStation in loss ? Amazon sells it’s kindle and prime subscription with zero profit margin. Infact Airtel and Jio sell their broadband connections in losses. These things are done b’coz the company’s AIM is – To Hook You in their Ecosystem. If you buy PlayStation then you surely need to buy games. If once you took broadband connection, you need to pay bill every month. In fact if you buy MacBook then eventually you will also buy their paid softwares. And that’s how they Hook You and makes Profits. Due to this these companies are ready to sell their base product in loss. So the question is if Gillette had this amazing business model then how they failed in India ?
Why Gillette failed in India?
So the answer is Product before Consumer. Gillette entered in Indian market with their Gillette Vector Razor. Before launching the product they did research on 200 Indian MIT student but interestingly, their product failed in India. The question is WHY ??? The research was done on MIT’s Indian students but they used to live in US And this was their biggest mistake Gillette is a Procter and Gamble product and when it’s CEO came to India he was shocked. He saw people had no enough water to shave. In USA where people used to shave in running water, in India people shaved using water in mug. Americans shaved after every 2 days whereas in India people hardly shaved twice in one week. In USA, water and their beard both are soft but in India water and beard both are hard. When Gillette lauched its Vector Razor, people bought it but they were not able to use it properly. So Gillette realised – Now it’s Time to change the Game. They studied about people of India and concluded that majority people was cheap and strong razor. After doing reverse innovation, Gillette launched Gillette Guard and Gillette Presto. These products were too hit that till today Gillette is dominating India’s Razor market. So without knowing Consumer behavior company need to hard sell their product. The better way to it is- Understand the customer first. Well honestly it is not so hard to understand people as you think b’coz most of the behavior are common. Like how Dale Carnegie in his book ‘How to Influence People and Win Friends’ tell that – The first thing which interests someone is themselves.
FAQs Related to Gillette
Who owns Gillette?
Procter & Gamble Co. Procter & Gamble Co., the leading U.S. manufacturer of household products whose brands include Crest, Pampers, Tide and Charmin, is owner of razor maker Gillette Co.
Is Gillette an American company?
Boston, Massachusetts, U.S. Gillette makes safety razors and other personal care products, including shaving supplies, for the multinational corporation Procter & Gamble (P&G).
Why did Gillette fail?
Gillette missed out on one crucial insight regarding shaving habits in India when testing the product at MIT with Indian students. This was the main reason for the failure of the product.
what are the business lessons we can learn and implement in our business ?
- Reduce the barriers of Decision Making Many big companies try to sell their product with lower prices with maximum features. This is done so that people take decision to buy their product as fast as possible. It should be your goal to reduce consumer’s decision barriers. So that consumers grab the opportunity as fast as they can. This brings us to 2nd business lesson.
- Build an Ecosystem Bate Had you ever thought that why Amazon gives its prime membership’s 1 month free trial for free ? Why JIO distributed its services for free for 6 months ? These companies delivers this value proposition with frictionless entry in their ecosystem. And once you are in it’s very tough to get out. But in business, ecosystem is less important then the way to build frictionless entry for customers. B’coz once they are in you get loyal customers for very long period of time. And this brings us to third and most important business lesson.
- Do not ignore the changing trends in greed of Profits. In business as profit increases, greed also increases. Kodak is a perfect example of it. As much profit was coming from camera rolls that they ignored that whole world is shifting to digital cameras. And today maybe some people only use Kodak Cameras. Profits are important but not so much that you forget to change with time. Its a saying that Change with Time otherwise you will get hurt Time will Change. Today everything became costly but had you ever thought that why Parle G is of 5 Rs only ? And what’s the secret behind Parle’s pricing strategy ?
