Business and marketing case studies are interesting to read and since it’s a real world proven solution, that makes it even more compelling.
This is a case study about Gillette company and a brilliant salesmen King C. Gillette.
In Late 1800s clean shaving was trending.
In the 1800s, there were only two options to shave. Use a straight razor or safety razor.
Both of them come with it’s own issues, straight razor is difficult to handle safely and it was mostly in use by barbers.
With Safety razor, people need to sharpen the blade on every use and it is a tedious task.
This is when busy salesmen King Gillette thought of an innovative and better solution to the problem. He came up with a disposable blade idea and got a patent for it.
People can keep the razor permanently and they just need to change the blade regularly.
Every innovation is a result of tasks with undesirable experience. In this case, because of the tedious and risky shaving task led to disposable blade idea.
This innovation made Gillette company as a market leader of this segment and it was a market leader for more than a decade.
But after the patent expiration, competitors came in and Gillette lost substantial market share. Gillette company sales year over year was -20% at one point.
This is when King Gillette came up with the most brilliant and revolutionary marketing strategy. He introduced the “razor and blades model”, which is to sell razors on very low margin and blades on higher margin
Once people buy Gillette razor, they are in the Gillette ecosystem so people come back again and again for Gillette blades. This brilliant business strategy led to an increase of 120%+ sales.
This model led the foundation for lot of companies with products like PlayStation, Amazon kindle, Kodak.
PlayStation are sold in lower margin to bring people into the Sony games ecosystem that will make them buy game cds which are sold on higher margin.
Amazon kindle sold in lower margin to bring people into the kindle ecosystem and sell eBooks on higher margin.
Kodak sold cameras in lower margin to bring people into the Kodak ecosystem and sell camera rolls on higher margin. Kodak ignored digital camera disruption that was the downfall of the company.
Takeaways on this case study
1, Find the points of maximum reluctance — In case of Sony gaming ecosystem, customer reluctance might be when customer buys PlayStation
2, Get customers into ecosystem — By selling PlayStation with a lower margin
3, Never neglect disruption — In the case of Kodak, it lost in the digital revolution.