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Why Innovation May Not Be Enough

Mira John Plammoottil URN: 6487090 Word count: 1,444

Executive Summary This report is commissioned to evaluate current strategies of Gillette, which is founded by King C. Gillette in 1901, Gillette is one of the grooming industries through manufacturing efficiency and exceptional marketing strategy. Gillette offers customers with high quality shaving products that can satisfy basic grooming needs. This report will begin with situational analysis by analysing macro environment of Gillette using PESTLE analysis followed by Porter’s five forces, which has mainly focused on industry competition and other competitors of Gillette. Then the report has focused on customer analysis of Gillette by differentiating the target segments. Secondly, the report will be focusing on internal environment and SWOT analysis of Gillette. Next, the report is focused on the critical part of analysis framework by evaluating the current strategies of Gillette, by identifying the challenges that Gillette is facing. One of the main challenges that Gillette is facing currently is the loss of market share due to high competition. This report is concluded by tackling the challenges and recommending the alternatives to gain market share.

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Table of Contents Executive Summary............................................................................................... 1 Situational Analysis – Analysis of Macro Environment...........................................3 Table 1: PESTLE Analysis....................................................................................3 Analysis of industry competition and competitors.................................................4 Table 2: Porter’s 5 forces.................................................................................... 4 Table 3: Competitor Analysis..............................................................................5 Table 4: Customer Analysis................................................................................. 6 Internal Environment & SWOT Analysis.................................................................7 Gillette’s current strategy................................................................................... 7 Table 5: SWOT Analysis....................................................................................... 8 Evaluation of Current Strategies & Problem Statement.........................................9 Alternative Strategies.......................................................................................... 10

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Situational Analysis – Analysis of Macro Environment Table 1: PESTLE Analysis PESTLE FACTORS Political Economic

MACRO-LEVEL FACTORS

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Socio – cultural

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Technological

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Legal

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Environmental

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IMPORTANCE OF KEY FACTORS

Consumers become increasingly sensitive towards high price innovative shaving technology Gillette experienced economic recession on 2008

Higher price can lead to negative impact to the company as consumers have alternative options

Increased consciousness towards grooming through manufacturing efficiency and exceptional marketing Providing consumers with high quality shaving products that satisfy basic grooming need at fair price Increasing no. of online shopping sites like Dollar shave club

This has led to effectively capturing more than half of the entire razor and blades market across the globe. This is an important key factor for Gillette as targeting customers can lead to increase of sales and market share

Increased use of online shopping Continued investment of resources in R&D for ‘next big thing’ New technological innovation

Technological factors can affect the operations of industry and the market positively or negatively. As these factors can influence the many decisions like launching a product or outsourcing

Lawsuits against misleading ad. For example, Gillette claimed that ‘the world’s best shave’ and ‘the best man can get’ was misleading for customers Introduction of increase in awareness of pollution as the industry experiences decline in sales of spray products

Legal factors can affect the way the businesses operate, and it has changed the consumer’s preferences and purchasing pattern This factor can affect negatively as the industry itself experienced a sharp decline in sales. This can affect both internal and external factor of growth and opportunity of Gillette

The key macro – environment that can influence Gillette is PESTLE analysis, where it can analyse and monitor the factors that can impact Gillette’s performance. In conclusion, Gillette is a highly successful and competitive that provide high quality of products and services. The economic changes like recessions has affected Gillette to compete against cheaper alternatives like Dollar shave club. Economic, socio-cultural, technology, legal and environmental factors play a major role in competitive world. For example, due to high volume of alternatives Gillette should be more sustainable in the products they produce, which will allow Gillette to improve their brand image among consumer who prefer sustainability.

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Analysis of industry competition and competitors Table 2: Porter’s 5 forces FORCE 

 Intensity of rivalry

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   Threats of new entrants

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Threats of substitutes

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Bargaining power of customer

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Bargaining power of suppliers

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RELATED FACTORS Intensive competition in grooming industry. Rising market share of Schick’s to 2.9% to 17% Sustainable competition through technological innovation High competition between online and offline companies like Dollar Shave Club and RazWar.com Large advertising investments High barriers for competitors to enter on large scale Threat of new entrants like Wilkinson Sword – Schick, Bic and online sites like Dollar shave club Time consuming Low customer loyalty for other brands as it is easier for buyers to substitute with alternatives Threats of substitute is high as the customer can switch the brand to lower cost products Increasing number of substitute products in offline and online stores Large buyers like retail stores and individual consumers hold high bargaining power. Higher chance of buyers to substitute products with lower prices Buyers can compare prices to other different products to gain cheaper alternatives Bargaining power of suppliers are low as the brand like Gillette is a huge buyer of supplier goods

ASSESSMENT

High

Moderate

Moderate

High

Low

To conclude, Porter’s 5 forces can enable Gillette to analyse key forces that affect the industry from micro-environment. Five of three main competition includes threats of substitution, rivalry and new entrants. Gillette operates in an unattractive industry, with powerful and aggressive competitors. Under the ownership of P&G, R&D effort had led to generating diversity and technological advances. The other two competition include bargaining power of suppliers and customers are moderate to low. This is mainly due to high price sensitive buyers and the increase of consumer resistance in paying for high quality products with technological advances.

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Table 3: Competitor Analysis COMPETITOR

OVERVIEW Price

Wilkinson Sword – Schick

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 

Bic

Dollar Shave club

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Main competitor: Led to a oneupsmanship by introducing 4bladed Schick’s Quattro Demographic: For men and women Market share: increased from 2.9% to 17% Innovative competitor with low – priced disposable products

Operating online with 12,000 customers, which provide 3 service offerings Provided a shaving experience with lower costs with monthly option

Moderate

Low

KEY SUCCESS FACTORS Product range Flexibility to create new product Moderate Introduction of 1st 4 bladed razor called Quattro





Low

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Low priced disposable non-refillable pens Disposable razor and lighters The humble twin The 4X The Executive

USP

World’s 1st 4 blade razors for men and women

Low

Introduction of disposable razor, lighters and nonrefillable pens

Low

Online operation by selling products for cheaper price

The second part of situational analysis include the current competitor analysis of Gillette. Gillette’s position is higher comparing to its above 3 competitors as Gillette focused on complementary products to enhance product line and to expand marketing strategy. Gillette has expanded globally by understanding the customer needs by investing on R&D outside the USA such as in China and India. One of the main competitors is Wilkinson Sword – Schick’s as they used 1st 4 bladed razor which has increased their market share to 17%. The main current competitor is Dollar shave club, with new shaving experience with low cost and mail ordering on monthly basis.

Table 4: Customer Analysis 5

Segment Primary target: Premium branded

Segment profile/ characteristics   

Secondary target 1: Super premium

  

Men and women with low to medium disposable income Upper- upper and upper- middle social class Mainly customers from developed countries like US Men and women with high disposable income Loyal customer who don’t wish to switch their brand Europe, USA, India etc.

Segment preferences  

      

Secondary target 1: Regular

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  Possibilities: Hair removal creams, spray and wax strips

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Avoid targets

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Students/young working men and women with low disposable income Consumers from developed and developing countries like India Age below 15, parents will be the buyer Men and women in Upper – middle, middle – lower classes Customer from developed economies like USA Customers from regional background 15% of male population who don’t prefer to shave due to discomfort Men and women who don’t shave due to discomfort, religious belief and cultural reasons Consumers from highly concentrated religious areas like Europe, India etc.

   

  

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People who prefer to shave regularly Western influence play a major role in shaving behaviour Beauty conscious High value added Innovators and adaptors of new technology Beauty conscious Men and women who are actively involved in sports People who prefer to shave regularly Very high prices with high value added Single men and women Standard prices with acceptable value added Use razor on weekly basis Adequate quality product due to brand image Quicker alternatives for men and women Can be used on weekly basis Time saving

European women who don’t shave due to cultural reasons 7% of consumers who don’t shave due to religious reasons

The current market strategies of Gillette is the collaboration between product development and marketing strategy. Gillette also produced Mach3 Turbo for men and Venus for women to expand the Mach3 technology and market share. Gillette has focused on male dominated sports marketing activities to create brand awareness. The current market segmentation of Gillette is mainly having customer’s with high disposable income as Gillette has sustained premium pricing, therefore the product and quality of the products are high. Gillette has used innovative technologies which has led to converting customers to higher priced razor and blades like Sensor, Sensor Excel and Mach3 etc. However, the competitors has high and low tier segments, which has led to decrease in market share of Gillette.

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Internal Environment & SWOT Analysis Gillette’s current strategy Based on competitor and customer analysis, one of the core strategies of Gillette is mainly aimed at innovating blades and razors products. Gillette are focused on technological improvements that can earn superior premium position in industry and among other competitors. For example, introduction of Sensor, Sensor Excel and Mach3 lines from single to twin bladed razors are globally known Gillette products. Moreover, under the ownership of P&G, Gillette invested in R&D to further expand their global brand. Gillette expanded its product portfolio by creating a shower experience like Gillette’s hair care and body wash for men has led to significant brand extension and emphasise Gillette’s brand as world’s leading male-grooming industry. Gillette’s current target segment are men therefore, the current marketing strategy was towards male – dominated sports marketing activities. This include Gillette’s stadium at NFL’s New England Patriots and soccer’s New England Revolution, Gillette’s Young guns campaign and other tie -in with Olympic games.

Table 5: SWOT Analysis

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Strengths  Strong brand image  High creativity and strong R&D investments all around the world  P&G resources and other technology advances  Historically most innovated razor market  Successful & innovated products like Sensor, Sensor Excel, Mach3 (3 blades), Fusion (5(+1) blades 2006), Fusion ProGlide shaving system (2010)

Weakness  High price products  Primary product like razors and blades is in maturity stage of product life cycle  Not active in social media other than Facebook  Made reckless acquisition which has led to unprofitable  High pricing has led to new start-ups like Dollar Shave club  Considered as luxury product comparing to other competitors  Products are mainly focused for men Threats  Huge competitors like Schick and Bic  High bargaining power of consumers  Online competitors like Dollar Shave club, which has led to lowering market share of Gillette  Cultural and religion reasons  Several substitution of razor products

Opportunities  Invest more on environmental issue as most of the product are non-recyclable  Expanding and innovating complementary products to solve issue that minority of customers facing. For example, 15% of world’s male population does not shave due to discomfort and 3% don’t care to shave  Promoting Western- style culture campaign to attract teen, young females  By considering the majority of customers spending power Gillette can lower the cost of production  Global expansion

The above SWOT analysis is the summary of findings from situational analysis and internal analysis. The Gillette company has proven to be a market leader through strong brand image and innovative technological products, complementary products and services. Gillette monopoly reigned in the grooming market until 1962, under the ownership of P&G, Gillette successfully saturated in U.S. market with the introduction of newer technological innovation. The drawback is the high price for habitual products. This has led to higher alternatives of substitution and decrease in market share. The gender contamination was visible in razor campaigns for women was targeted towards men. There are many opportunities that can help Gillette to expand their market share as the 15% of male population doesn’t shave due to discomfort. Therefore, focusing on complementary products that can solve the issue to gain high market segment. The threat would include high volume of competitors, which has increased the purchased power of customers. This can impact Gillette in short to long term effect as it can lose the market share.

Evaluation of Current Strategies & Problem Statement 8

One of the main elements of Gillette’s current strategy is the marketing strategy. The marketing strategy of Gillette has always served the need of customer by creating emotional atmosphere of advertising campaigns. This has led to a connection between Gillette and its customers. Moreover, Gillette has used modern technologies like advertisements that focus on sports and using celebrity endorsement to attract the customers. Use of replicable technologies in products like Mach3, Fusion etc. has also played a major role in gaining strong brand recognition and reputation. However, one of the main drawbacks the Gillette faced was during 2008, due to misleading advertising campaigns. The purpose of advertising marketing campaign was to emphasis the value of the product. However, consumers find it misleading as Gillette’s advertising stating for Fusion (5 blade razor) “the world’s best shave” and for Mach3 was “the best a man can get”. According to consumer reports, no additional performance was evident by 5- bladed fusion comparing to Mach3. This has led to consumer perception on Gillette as lack of staying power and product loyalty. Moreover, the gender contamination was visible in their advertising campaign as it mainly focused on male population than on women. After 1962, Gillette’s performance was fluctuating up and down due to high competition in the industry. The introduction of Wilkinson – sword Schick, impact Gillette as it led to substantial loss of market share from 70% to 49%. Moreover, merging with 4 companies has led to being unprofitable as 3 of the mergers has low profit. However, Gillette retained the market share by introducing Trac 2 razor, which was a great success for the brand. In 2003, introduction of Schick’s Quattro has led to Gillette’s total share of razor and blade market had fallen from 4.3% to 63%. Due to the high cost of shaving, there was increase of starts-up like Dollar Shave Club, which was a cheaper alternative online competitor. This has led to Gillette’s U.S. market share dipping to 2% over the year. The performance have declined over the years due to increase of competition like Schick, Bic and Dollar Shave Club.

Alternative Strategies 9

The main problem that Gillette currently facing is the gender inequality in marketing strategy. The gender contamination was visible, as the product was mainly focused on male population. Gillette has introduced products for women like Venus, Sensor for women and Sensor Excel for women however Gillette’s marketing strategy for Sensor was focused on male dominated sports activities. Therefore, Gillette needs to put high effort in women population as the majority of the products and campaigns for women are focused on men. Focusing on new product innovation with technological factor can remove hair different from men given women’s complex curvature can create a high segment of women consumers. Focusing on women population can does address the problem that Gillette facing currently. Moreover, Gillette’s competitors focus more on male population. Therefore, introducing more innovative products can gain market share and sales. This can match the internal and external environment analysis of Gillette. This can solve Gillette’s gender contamination by taking advantage of women that are influenced by Western lifestyle, in which shaving being a part of daily life. In the marketing campaigns, Gillette can use new marketing strategy by creating a women centric brand, using women influencers like actresses or female who are active in sports and create loyal customers by embracing women being independent and capable. The main objective of advert should encourage women to be natural and how shaving can be a choice than a requirement. Gillette can also create a different brand name for women’s products like Gillette for Women. The cost of product innovation for women can be complicating as it is different from men’s product. Therefore, high investment in R&D is necessary to create pr...