MKTS Assignment

Ashwin Bansal; PGID – 62210352; Section J

This report explores how P&G should respond to the disruption in the men’s grooming market being
caused by the Dollar Shave Club. P&G’s brand Gillette has been the market leader in this segment for
the last 100 years when it first came up with safety razor. Since then, constant innovation has helped
Gillette maintain its position at the top. However, Dollar Shave Club is now disrupting the market
using unique value proposition and distribution channels to gain market share. Furthermore, P&G’s
biggest competitor, Unilever may be allegedly looking at buying Dollar Shave company which may be
make the grooming market even more competitive.

Gillette has been the market leader in the segment for more than 100 years. Their success can be
attributed to their value proposition for the customers, their go-to-market strategy, and their
business model. The company pioneered safe shaving with its safety razor. Before that, people used
sharp knives and the shaving experience was incomplete without nicks and cuts. Gillette brought
about safety and convenience with its safety razors. With rising competition, Gillette built on its
success with relentless innovation and drive to improve customer experience. However, this started
a product war with between the top competitors with each player improving their razors with more
number of blades and allegedly better customer experience.

The company mostly sold its products through retail outlets such as department stores, general
stores, supermarkets, and drugstores. Gillette sold its products at huge mark up to costs and kept
about 65% of such proceeds with itself and shared 20% with the retailers.

Gillette also pioneered the two-part pricing in the razor blade business where it sold the razor at a
loss but marked up the blades significantly. They built a locking system in the razor such that only
their blades would fit in the razor, thereby creating barriers to entry for competitors wanting to sell
refills for the product.

Dollar Shave Club (DSC) was founded by Michael Dubin and Mark Levine in January 2011. They
believed that the current razor market was “over-priced, over-engineered and over-marketed” with
very frictional shopping experience. With this insight, they created a shaving products company that
would disrupt the industry.

Their value proposition involved providing shaving products for me in an economical, convenient
and engaging manner. They had three simple product segments which included 2-blade, 4-blade,
and 6-blade razors. Their cartridge cost for each of these segments were lower than the cheapest
cartridges provided by Gillette. Moreover, they paid special attention to customer communication
and engagement in their products with quirky messages and gifts on delivery. They portrayed
themselves as the friendly neighbourhood barber.

DSC outsourced its production to Dorco which already supplied its products to a lot of players in the
industry. The company also diversified into other bathroom products for men. Furthermore, DSC
pioneered the subscription model and direct-to-consumer distribution channel for its products. Each
customer had to login to the DSC website, select their subscription and they would start getting their
deliveries accordingly. This was extremely convenient in contrast to the buying experience for
Gillette razors where sellers frequently kept their razors under lock and key and built in a lot of
friction in the purchasing process.

The subscription model also unlocked different customer segments for the company where the
customers were more infrequent shavers and found traditional razor companies too expensive and
unsuitable for them. The model gave the company an opportunity to customise its services across its
customer base and build it further.

Finally, DSC came up with an exciting way to connect with its customers using Youtube videos and
improv comedy. Its first video got about 22 million views in a span of 4 years. Moreover, its
Facebook following increased to 3 million followers compared to 2 million followers for Gillette. The
company also undertook a lot of community building activities including awarding recognition to its
first customers in the form of lapel pins. It also placed customer reviews prominently on its website
and endorsed the fact that its online rating was 4.7 out of 5.

The company is on its way to earn $200 million in revenues capturing about 7% of the razors and
cartridges market in the US. DSC is also making inroads into other geographies across the world such
as Australia, Canada, and UK. Moreover, there have been rumours that DSC might be in talks with
Unilever for potential acquisition. This would be particularly problematic for P&G considering that it
already competes with Unilever in multiple products across multiple geographies.

P&G, through Gillette, has primarily focused on product and marketing related activities, where it
used celebrity endorsements to push its product. It could tweak its marketing mix to target its
customers in a more engaging manner. However, it might alienate the other customer segments that
Gillette caters to and it may lose its reputation in the market.

The company could also look to bid for DSC and build one more distribution channel in a more
inorganic manner with possible synergies as well. However, the core community of DSC would be
alienated as the company was founded on anti-Gillette messaging. This might impact adversely to
P&G as a whole.