The Gillette

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					The Gillette
Company                                                    - Prcf . Senthil Ganesan and
                                                                Debanjan Bhattacharya
   The case study describes       the Product develoPment
strategies ofthe world's number one shaving products company,
Gillette, over the decades. A detailed history ofthe comPany is
 given that primarily focuses on its various acquisitions. The case
 explores the rationale behind Gillette consciously diversifying
 its product mix and then fine-tuning the same. The strategies
 put in place by the company for develoPing and marketint two
 ofits globally successfulbrands, Sensor and Mach3 are discussed
 in detail.


In early 2003, Boston (US) basedGillctre was the rvorld's leading producer of razors,electric
shavers, shavingcream,wet shavingproductsand hair removal dcvicesfor both mcn and women
In additiorLtc.r traditional shavingrelatcd products,Gillette'sproduct line also included
tootl.rbrushes,                   and other householdapplianccs lfith the purchase  ofDuracell
batteriesin 1996, Gillette was also a leadingplayer in the alkaline battery market'

    Ovcr the years,Gillette had established formidablereputation for combining sophisticated
technology end sawryarJvertising launch premium products The company aimed at deriving
                                                                              such emphasis on
40,/oofirs salcsfrom entirely new productsand not just product line extensions.
continuousinvestmentin R&D had resultedin successful     productsasMac3, Sensoq   ScnsorExccl,
                                                \Women   Venus Of the compat.ry'sentire product
Oral-B CrossAction Toothbrushand Gillette for
linc, Mach3 anclScnsorwere consideredto be its   greatestproduct launches'

    For fiscal 2002, Giilettc's saleswere $8.45 bn, up 0.5% from thc earlier ycar Net income for
rl.[s pcriod rvas$ 1.21bn, a 33olorise. Gillette ernployed31,300persons, which about 727owere
locatecloutsidc  the US. Being a'product company" Gillette investedmilLionsofdollars each year
for Researchand Developmenr (R&D) (for the past five yearsthe company had on an avctage,
spent 2% of its revenucson it). Gillette conductedits R&D activities through sevenlaboratories
located in the US, UK, Germany and Spain.

Background      Note

Gillettc's             backto King Giltene(Gillene),
           history,Jates                                 who had established career a product
                                                                           his        as
salcsman.   ln 1E95,rvhilc rvorkingfor the Baltimore SealCompany,Gillette chancedupon an idea
for a disposable razor blade. He rhought rhat men would be intercstedin shavingon thcir own,
insteado{ visiting the local barbershop. alsodiscoveredthat men were willing to pay asmuch
as$5  for a home shavingkit. Gillete reasoned   that, asthc bladeswere cheap,the cost ofshaving at

O ICFAI Press. Rights Resewed.
hornewould slowly decreasc             and that morc men would pick-up the habit ofshaving daily ln 1901'
Vzillium Nick"rsorr, a MIT graduateantl a successful                   rnechanicalenginecr' joined Gillette and
                                                                           in Boston (the name was changed to
,.*",fr"r ,f-t"t f.t*.d the Gllt"ne Safety Razor Company
Cillette Company in 1952).
                                                                                    production of a blade ln thc
        The two men quickly developedthe machineryfor the low cost
first year of launch (1903), only 51 razorsand 168 bLades                   wcre sold' The following vcar' an US
                                       product and soon the salesincreasedto 90 E44 razorsand 121'648
o"i"i, *^ "*"ra"a'to the
                                                                             marker for razorsand blades As thc^
llarles. Mthin two years,Gillette captured 80% ot rhe US
                                                                              in London in 1905'
buri,r"r, gr"*, Glll"tte established first oversersoperation

        The sameyear,manufacturingoperations                 were setup in Paris Giilette soonopenedsales         offices
                                                                                     set up operationsin Belgium'
 i,.rG"r-uny, i"r-rnda and France.During the nex! 20 years'Gillette
 O".-urk n,rd ltaly and established              branch officcs in Madrid, Kolkata (lndia), Gencva, Sydn':1i
                                                                                                          for about 30Yo
 S,"*"p"t", il"".t            ,^'iresand Tokyo. By 1925, international operationsaccounted
 of thc company'srevenues.
                                                                                                     idea of giving away
         During \7or1d War I (\UWI), GilLettchit upon an                'shave'and 'save'plan)'
   . ' - T h i . u t and e d t 1 of Wrigley's f p o e n t i a 1 such outlets o banks
 frec razorst ' o . tboxesr o u s a n d s ogumtthroughc u s t o m c I s tass e L f - s l r a v i r r g .

                                         G i L l e t t e ' s r o d u c t ss o o n c a u g h r t h e a t t e n t i o n o f t h e U S
                                         c.'u"tnrrr"nc' which ordercd 3 5 miltion razorsand 36 rnillion
          when the war
                                         blides. Solcliers       soonstartcdshavingon their ow. vhcn thc war
            was oYer'
                                         was ovet' Gillette used advertisementsto make sure that the
           Gillette used                 soldiersdid not lose the habit. The company's advertisements
         advertisements                  slowly built tire braDcl'simage and soon evcryone startccl
            to make                      associating        shaving   with Gillette Gillette stoodto gain againduring
          sure that the                  !/orld \ ar         ll, whcn the War Production Boarcl ordercd chc
            soldiers did                 compary to dedicateits entire razor production and i:""
                                        LhcUS milirrrl.
                the habit
                                             Duringrlrcp,*r WWI pcrioJ Cillcrre'" ompetitor'.Autn.Srrnp
                                        Safery Raior Companydeveloped       arazorinto which Gillctte blades
                                                                            that could fit inro both GilLcLte
  could fit in. Thc company also developcda bladc caLlcdProbak
                                                                in product designand productior.r          between
  "trJRu,u Srrop ,urorr. Sir-r."th"ra *"r" many syr.rergics
                                                                                       The Great Depression'
  ,h" ,*'o .o*pu.i.., GilLette and Auto Strop decided to maee 1n ll]o
                                                                       in the US' put LLemendous           pressure
  *hi.h b"gol, i r rh" late 1920s(lastinguntil rhe carly 1940s)
                                                                   to price--c u.nitg   to boost salcs As a part
  ." Ciif"i" *a et,o Strop'sprolitabrlity Grllerre resorred
                                  Gillette alst' begansponsoring    maior foothrll and basebalL        events'
  .ii , f--",i"""f       ,trategy,
                                                                          its core area o{ ra;ors and blades'
        During the mid-1930s,Gillette decicledto expand beyond
                                          ShavingCrearn    (1936) and the Kumpakt electric razor (1938'
  Ciff"* i,i,-au."a the Brushless
                                                                         of latl.rershavingcreamHowevcr'
  later withdrarvn in 1940)' In 1940, Gillctte launched its
   thcseproductswerenot a commercial          success This prompredthe companymanagcment diversifi'     to

   ;;-r".; rh""-t products. ln 1943, Gillette entered         into an agrecmentwith Bendix Aviation to
                                                                        p u r c h a s e dt o n i C o m p a n vt a U 5
   ,,rndu." .rrbur",or [uel conrrolunir'. in I948, OilletLc
                                           kits for women)
                              p"rrr',u,,c,,t                ln 1955'it boughr thc PaperMaIe            Companv'a
   ;;;;i;.;;t"t      of ballpoint pens' for $15 mn hr 1962'      Gilletre acquired Sterilon Corporation' a
                                                            '       Gillette organized
   -r."i".rr*,      .f airposable-supplies hospitals'FolLowing
                                          'fhc fii'c operaLing
                               clivisi.ns:     GilleLtcSafetyRazorcompani,, The Toni co.rpa.1i 'l hc
      Prper  lvfare Conpan1,, Uasrcrn
                              Thc           Hemispherc  Divisicrnand rhc \Vesrem     Hemisphere  Division
      (thcEastern wesrer' r1i'isions
                     ancl                  rverc[aterc.ns.lidltcd into Gillerrc'I:rternaLi.nal 196E)In
                                                                                            i,-'      .
      1967,  GillcftcricqrrircdBr,.n (wesrGcrmany),     rvhichmanurircrurcd   elecrricrazors,hair drycrs,
      highfidciiq'  spcakcl5 cameras.
                                       conrinucdduringthe 19?0swith the accluisition [-aGiulla,a
      smallltalianchewinggum and candy ma'ufacturcr and sevcrals'raii houschold-pla't and
      pottuig soilcorlparies. 1971,CilletLcacquircda 4601,
                              In                             intercstin ST Duponr Company,     a
      Frcnch uranufacrurcrofhrxury wriringinsrrumc'tsa.d disposableligliLcrs.'rhc        year,
                                                                                folrorving    ir
      tookoverBrrxton, producer fpcrsonallcarhcrgoods(soldoflby 1977).In r973,the conrpany
                        a         c
      acquircdJafra,a cosrnetics
         c.lmen Mocklcrbccamerhc chirirmiin and cEO of Gillcne ir.il976. During his tc.ure, N{ockler
      rcnrovcd 200Braun
               over        producrs
                                  fromrheproducr   linc during1974-?7 l9?9, cillertc purchasccl
            Papcr,cornpatiy hacl
      Lrcluid      a       thaL   devcloped uniquefluid for makingryping
                                             a                                 corrcctions. 19g4,
                                 Gillette brancheclinto der.rtal care producrswirh the purchaseof
                                 Oral-B Laboratories for$188.5mn, 1he Oral-Bbrand wasa Ieadir.rg
                                 player with 257o share the US toorhbrush
                                                         of                     markcr.
          Gillette came under
                                     By the mid-1980s,   Gillettc had five major linesoi busurcss:
          pressurenot only to
                                 Blades  and razors, toilctriesand cosmctics,  stationary protlucts,
               improve its
                                 Braunappliances, Oral-B dcntalproducrs.
                                                    and                          Blades  and razors
        performance but atso     contributcd over 607oof the company'sprofits rhrough nost of
              to bring new       rhe 1970sand 1960s,evcn though they a-^ounted for only
                prooucts         one-thirdof thc toralsales. 1987,
                                                              ln       Gilletreacquired  Waterman
                 to the          Pcn Company,a lcading French nanufacturer and marketer of
            market, faster       premiutn writing insffuments.

                                      In the latc 1980s,Gillertc's salessuffercd due to increased
                                  competition.As the salesand sharcpricelanguishcd,  GillctLefaced
                                  sevcral takeoverarrempts,mainly ftom Ronaldperelman    ofRevlon
     andconiston Part.ers,a New York-based  investmentfirm, Gillctte came under pressure only
     to improveits performanccbut also to bring new products to the market, faster varren Bufrett
     bailed companyout by offcring ro purchase$600 rnn ofconverriblc prefcrredstock ar 1,000
     a share,

         Followi.gMockler'sdearhin 1991,Alfred Zeienwasappointedthe chairrnan and cL.o. After
     takingover,Zeien insistedthat Gillctte become rhe leadcr in all its core busincssesand to that
     rffecrinvest$0.50 of cvery dollar in operatingprofit in rhree areas:R&D, capital spencling and
     advcrtising.Like his predccessors,Zeien also belicved in diversifyingbeyonclrhe corc blade and
     razor         Hc
          business. instructedhis executives look out for new businesses. 1993,Gilretteacr-ruired
                                              to                            rn
     Parkcr PenHolding Limited (wriring products), a British companyfor $421 mn. The deal made
     Gillette,already world'slargcstrazormaker,alsothe biggest
                     the                                           pen maker anclgavc the cr:mpany
     41o/o thc us writirrginsrruments      market. rn 1996,Giltette bought Duracell Batteriesfor
     $7.6 bn.
        In 1998'Gillcrte introduced tlre riple-blade Mach3 razor,wirich quickly becamethe largest
     selling    in
           razor the world.Also in 1998,Gillene intioduced the Duracell ultra, a line ofhigh-tech
     alkaline        for
             bacterie; deviccslike ccllular phones,riigital and flash c.mcras and camcorders.Also
     thisyear,Braunand oralB launchedthe Braun oral-B 3D plaqueremover (eleccric     toothbrush).
                                                                     It washajlecl the first productto conrbinc
                                                                                 as                            nr,<r
                                                                     distirct brushing morions (ptrlsarions ntl
                                                                     oscillarions)ro crearc a uniquc 3D brushing
                                                                       In 1999,COO Michae l{arvlcywasrlame.l
                                                                    rhc CEO. In 2000, Giilctre sold irs hair care
                                                                           (Tor.ri) heakl.,and household
                                                                    busincss      to                    pro,Jricrs
   s,rd sratio.ary business M",..:?:l?::]\r?',:Xlj:Jil;il
      its       proclucts (p*,",
   Rubbemraid. Fcbruary
             hr                  presidcnr
                              2001, lormcr Nabisco                  and c[o.Jamcs Kilts took over as
  Chairmanand CEO. In lare2001,Gilletteir.rtroduccd
                                                             rhe M".fr; f,,if,. .,l,1CrystalClearVenus
  sliirliltg systems
                   strcngtireDing position in thc bladeand razorbusincss.
                                 its                                            ln c)crobcr2002, Gillctre
  launched rwo ncu, oral care products: Oral_B
                                                    CrossActior_i  lnrv"r,-a bn*"ry_p_"ered toothbrusl.i
  an''l c)ral-B crossAcrion Vitalizer.'r'hc folrowi.g
                                                       month, ,tr" .n,'r,'pnnu:rn,rn.ruccd sensor 3, the
  onll tlisposrblerrzor availablervith tirrce i,.,a"p"na".,t
                                                             ,p.i,.,g_"r.r*"a lf"a*.
  Froduct Developrnent

   Gillctre'ssrrrcd goalu asto attain 40/o of its sares from products      introcluced rhc prcvious
                                                                                         in               five
  ycars.Anothcr reasoll was drat thc company
                                                    faccd the risk of bcing ourcloncby its.competitors
  who had the pracriccof introducing      similarproducts   rvithi,., shurr'p".n,d rimc. For insfani:e,
                                                                    o                 uf
  schick (parr of'warner La:nbcrt, larer takeir ovc': pfizer)
                                                         by           r.l"J iriir"r.a cilerre,s -rracr rivir.i
  bl:rclerazor n'irhin five 'rontrrs of its_iauncrr. simir;trlr iriJi,"t,"r.a        o* Arra razor (rvirh a
  pi'.ri.g hcad) rvithi^ 1E rnonthsand cillctre's
                                                      Atra pius razor(rvith. lubricaring       srrif) r,irlrin
  scyen mondrs lr.raddition,othcr leadingcourpcrirols
                                                               like Bic a1d had i^Lroduceci
  lorv-priccd bladesa*d disposabl"    rnror. trrutm,ulatlr" ,l'r"uir-rg.n."'-t "r. co'rmorriq,
                                                                                "                   ,nd put
  tremendous   plcssurc Gilletrc,s
                         on           procluct  Iine.
       Sinceirs i*ccprion in 1901,citcne haclcsrablisrrcd
                                                                        a repuratioD consistenrry
                                                                                       for               iaunching
 proncering     producrs, tunc rvirr.r uarker denand. In
                              i.            rrre                         1901,trrecompa.ry      haclinrroduccd  rrrc
 razor for men'sshar-ing         witrr a removabre      biadc. This rvasa not"il,-t.'n o, r, ar"oted a'erv rifcstyrc
 ol sclf-sltaving in rhc lateryears,
                   and                         cialy
 sliavrng.   This razor becameimurenscly
 popul.rrancl salesof razorsand bladcs
 r e e c h c cI m i l l i o n a n d 1 1 5 m i l l i o n
 rcspcctivcly 1917.
                 by                                                    Revenue   and Income Charl

      S u b s e q u e n t l vt,h e s h a v i n g k i t s
 clcsigncd drc US military during WVI
 crcate.lthe sclf.shave         habit on ir nirtiolal
 scrle rvliilc World Var li helped to
 p o p r r l a r i z e r h e d a i l y - s h n v c h ab i t
 throughour US.Gillerte's
                    Lhe                     investnrent
 in R&D lcd to thc crea[ionofrnanynerv
proJLrcrs. productlinc includcornc
Llrushlcss       shaving    crean (1937) and ar.i
clccrricshaverand GillerreThin B.lade
(1913) and rhe Tich thrcc-piccerrzor                                   reve-nues             f   i";;l
in 1919. The Brushless                shavingcream
                                                              E x h i b it t t
                       ____                                  Lineand FroduclMir
                                              t s W i d l h t , f l h e p r o a , ,r 1 i , , "
                  and Ra or5                                     Tt)ilctries                                    Batteries
  Depth I 5havtng5tstcJn                                      Shavepreparationli                                Duracell
  ot    I lr,1ach3,
                 SensorExcel,                                 C i l l e l t e S c r i c s ,S a t i DC . t r e   Ljitra b.ltterics,
  ihe       Serior,Alra,lliAC ll.                             s h a ! L ' g c l ,S o l t & D r i , l ) r y,Faji'f el).
            Distr'osable        RazorBrands                   idca brands.
            M a c h 3T u r b o R a z o r ,C u s t o m Deodorants
            Plris.   Cood Ncrvs                               RightCuard Deodr:rants
            WornenShaving               tro(lucls             Oral'8 product$
            Sensor     Ircel for \'\,ornen,        Strtsor Kids polvcr brushcs,                  batterl,
            t o r t V o n r e n ,A g j i i t y , V e u s toothbru5hes,                Cro5sAclio[,
            brands.                                           Vitalizer,llrush plrrs,Porver
            Braunproductssegmenl                              stnpe.
            F o i l e l e c t r i cs h a v e ri o r n r c n ,
            cloclricepilators women.   ior

 lc.lLhc'ry ro rhe larircrsha'i.g crc.m in 1940.i. 19,f6, lr,*chccl rlic Bluc Bl.rlc clrsl,crrscr.,
 clinlnatrng rccd fol urrurafIing blatlcs.
    By purch.rsir-.g Jirni (lontlnnt, in 1948,ClillcrtccnLcrr:J
                   tlrc                                               th., tnurkcrfor rvonicti.   TonL,s
pioduct incrutlcd
        linc            Iromci)cnruncrrt-\r'il\:c rvitlrctrrlers, rvaving
                                                 kits               lr         l,:rtion and ucutreli:cr:
Thclbni kitsucrc pt,siriorcrl scll-rrsc honrcrnJ atLrirclcd
                                 for       at                      n'orncn  l,ho li,r J it r.xpr:nsivc
visitLrcaLlL)     t()o
           sirlolls oflci).
                                                    iirGillcLLc. coorfirnv
                                                                The                    inro l.ailpoilr
                                                                               ulovcLl tLrc
             thlltgli rhc acqtLisiLiorrof Papcr                   g1f
                                                Matc Oonrpanlq ..5qqq1snL11l innoduccLl
                                                                                  CilLertc            a
nunrber trov prrlducts
       oi                 iucluding  Whitc Rlin Shanrpoo,   Gillcrteliramyacrosol    lalhcr,r[c Cillcttc
          Salcq Razor,   ArLrtn Hair Spra1',RighL cuard clcodorart,  oillcrte sL:rinlcss l.latlcs,
                                                                                        srccl       rhc
Lady CilLcLtc
            [la:,1,I Icads lirir gLoommg Llrc
                            Up               aicls, Cillettt' h nrric Ra:orwitli l L.ancl
                                                              Tic                             jrstcarlol'
a bhdc,c:rsualhirircolor, Hotonc self-hcating
                           rhc                     she'urg  creaur antldisposablc  lirhLcrs. Lil,L[clarc
i960s,        rvrLs
      Cilletrc mirrkcriug uidc irngc ofproJucts morcrh:itr150counrrics.
                               its                      in
           lbllo*'ecl  thc slrirtcgv forcing u productiLriis linc to bcconc outrlutt.l,
          rcplltt:cnicLrt Dvcr)
                           srlcs.      thouth tcchnological  inrfrovcnrcnts, tIel rvcrtr
not iLrtrocluccd the tlcnratrtl cxistingproclucr-.
                 unLil                for                   dcclincilanclinvenLorics   rvclerlcplcrccl.
     conuatt), i'l bac on thc iLrnochrction
                        ii                      ofTiflon-coatcrl ra:or hla.les til consLrr('l-s' Lc l
                                                                              un                in fcs
i.tchromium           hrrl
   ,ies pcakcd.       But rhisstrarcgv  b'ckfircil'r rfrc 1960s u.d 1970s. Llic 1960s,
CiLlcLtc         rhc
        dclayctl inlroduction      ofsLirinlcss l.Llicle nolrgl,l.ccuu ihc prorluc dur:16ili1,
                                                srccl     rcch               sc            Cs
nicantrhlL pcoIlc r,vorrLrl    nccci iirr feucr L.ladesenrl also Lhc cosrsirrvolrcrl in ciilrrginr:its
nranulactuliLrg nrarkcting
                l,iil             ciftrrrsl'us high. As a rcsult,Wilkinson lod Scliick nlrclcltajor
inrordsinto Cill( ttc'snrrkci shar rvliichicll from 70,.to 559i,.
                                      c,                      to
   Durrrgthc 1960s and rhe 1970s, custo'rcrprcfcrenccsgrirclunlll,changcd douLric-crigcLl
bladcs trvi^-hlLdcLl
      to                    ln
                   sysrems. 1970,   clillcnc'sRt\D sta{rL.cga. *orking on a sysrcmrvhctcrhe
rNobLades r.vcre Landcm. T1-ris
               in               systern, howevcr, cncounLclc,-l cLrggingprol,lcm-.rrr6u1.1 its
closclyspacedtanclcmblaclcs. climinatethc clogging,
                            Tb                        cillertc cvcr rcsrcda .lc'ic.
    used shatpcnedwircsinsteacl blades, tht' u ircsu erc uor rigicl
                               of        but                        enotrgh clcligcr goo.l
                                                                            to        a
sha'e.Tl-rcseproblcms*,eresolvedbv iln ingcnious  Lrcrvskrrtcd-bladc de"sign rhr.ugl.r
                                                                            and          the
                                            E x h i b i ltV
            net sales(by each business

  F ,",.

 3 ,""

       B Blades& razors     g Personal
                                     care            B Duracell      E Oral care        I   Braun

process 'hysteresis'.
          ol            This meanr ttrat asa whiskerwascucby a blade,it wasalsolifted out slightly
from the hair folliclc and did nor recedeinto the follicle unril a {raction ofa secondaftcr it wascut.
Thc researchers    concludcd that a secondbladc, in tandem rvith tl.rcfirsr one, could cuc a whisker
ir sccond time and closerto its basebefore ir retractcd into the iollicle. The resuk wasTRAC Ii,
dre [ir't tu'inbladcshavrng  sysrem incroduced 1971.
                                                in       Gillctce:rlso developcd  TRAC TIfor rvornen.
For more than fivc years,TRAC ll remained the fastesr       growing product on the rnarker,despir:
thc launchofseveral    conpetitorproduccs SchickSuperI in 1972,
                                            likc                          Vilkinson Bondedin 1913,
Bic Disposab)e 1974and dre SchickSuperll in 1976.
    Following the succcss the TRAC ll, Gillenc stirrtedworking on a neu'producr, Atra, which
soughtto furrhcr improve the rwin-hladcshavingexperience.    Gilletre discovcred             shave
                                                                                drat a L.etter
could lrc produced,if insteado{ the shavermoving the hand and face ro producethe bestshaving
lngle for rhe bladc, the razorhead positioncdirsclfin such a rvayasro mainrain the most cffcctive
trvin-bladeshavingangle. Oncc tl-rcpivoting head wasshown to producea bettcr sh;rve,      research
continucd on product designand consumertesting. The name Atra rvasselecred       aftcr two yearsof
intensiveconsumertestilU (Atra stoodfor AuromaticTiacking RazorAction) and wasinrroducedin
mid- 1977. \Withiu a yearof launch,Ana razors rcplaced TRAC II asdre ieadingrazorin thc markct.
    During this time, the razor market rvasscgmcntedinto razorswith replaceable     bladcs,called
cartridge (or systems  razors)and disposablerazors,rvhich could be throwr.rour rvhen rhe blades
worc o!rt. Customcrswho cared a grcat deal about closencss      tcndcd co favor cartridges,pricc-
scnsitivecustomcrs preferredthe disposables. 1974,Bic Corporarion,a publicly trirdcdcompany
partly owned by SocieteBic S.A. of Francc,launched the disposable    razor The companyquickly
attair.rcd 9olo
         a                  in
               market sl.rare thc US. Tire success                    invited ri numbcr ofplaycrs
                                                    ofBrc's disposablcs
rvho started offering cheap throw awayrazors.Aftcr initially underestimatingrhc signi{icance   of
the procluct,                      its
             Cillctte soonrcalized mistake    and launchcd disposable
                                                             rhc                   of
                                                                           version TRAC Il. In
1977, Gille rtc introduced Daisy, a disposable     razor targeredat women. Cumulatively,by
thc larc 1970s, rnarketfor disposablc    razors stoodat 30% andby mid-1980s      stoodat 50%.

The Launch of Sensor

following tire launchof the Atra in 1977.Cillettc beganv'orkingon an improvedshavingsysremthac
could steerthe customers  nwayfrom low-priced             With disposables, razorl.rad
                                               disposables.               the         bccomea
commodiry,and the bufing dccisionwasbascdsolclyon pricc anc{convcnicnce.For Gllette, this
                                                      E x h i b iV
                                                     Profitability Information
                        Prolits(by each bu5incss

                                                                               Yt'ar ended De(ember 31                      l i n $ n )f l

                    n l t l l i tr
                    l                                             l
                    lln ll- l
                    l H l - r l H 1 : -l t r r r

         f n Bi".l".
                   1r."."                     E t+..r-i."*-

      mrrt siturltiou trorcucouraging.
         kct          was                   CiLlctterculi:ccl
                                                            rhirt it nccclcri procluctthar t otrLl tliflcrcntrarc
          fr.n tlrc rcst oi the coupctition and alsort'crctrtcthc intcrcsrand,slcm
      Lncll                                                                                           ra:ots.
         l : L o u v L a r so f r . : x p c r i c n c c' | r o d u c t
                                                      i                dc'cl.purenr and tcsri.g, Gillctrc had { .ut
      tiratshaving    rll':rys t vokcd ccrtain kcy'rcacLi(nsitl lnclr: It \\,asLinc-con-<unriLrg.        irritutiLrg
                                                                                                                   1rd olrcl
     unpJcaslttit    Rcscnrchstrttlics           sho*'ed rhuLlnost urcn madc l,cLwecnl00 rncl 5ur0        sl6kcs yhcl t|c1
     silrtlcd,  olrcn goinq or cr thc suntc aren rglin and :rgain.'fhis rcsultcciit a closc shnr,r huL lcfr thc
     skiul'ruisc.l.    Wlrirt nlcn r.r'rtntccl a cftrse,'"r'es         clcan lnd comiortablc shavc *'ithorrt licks alcl cuts.
     Thus aDic[a titl l clr twrn L.lar]e                  sltlving s],"stemrvrs tnrn.

        . ' \ c o c l c . . n r c d l ) r o j c c t l - L a i 1l , r n c * r r z o r r v a s d c s i g u e d t o h a ' c a
                                                                 h                                                         li'oring herd a.rl
     indcpcndcntly          nrountccl,nioving bladts Lhat werc srrpposed adjusr ro faciaLconrours. Bctr.r'et'n
     l9i7 .r,id l9El, Cillcttc sccurt'clfivc pirrcnrslbr rhis razor Cille||c scrrcncd 15 plasLics                                    l.ctbrc ir
                  resilicnt enough to bc uscJ as thc skin guard (which strctched rhc sliin in prel)i:r.1tioLr
     {or rhc i ladcs). hr 198f, rirc flototypc was co'iplcLcd tcstr:cl 500 men. si'cc Lhc r.csulLs
     ircrccncounging,Cillcrrc contiLruecl        rvirh thc Rr\D cllorrs and ovcr the ncxL thrct-ycars, addirionrL
     ttsts\'crr' conducrcrl. oveftill, rcsults srrggcstr-d    rhnt thc ncrv ra:or ourpcrfbrmcd L.orhArra :urrl
     TfuAC ll iLr clrscrcss, corrlbrt physical apircarancc.Bv 19E8, rhc ra:or tlt-"qigrr tlrrhcrrvas
     tmprovccl incllcle sLrchfeeLurcs rihhc] stainlcssstcel liandlc, an organi:cr thar coultl ho[l 1
                 ro                           as
     plck of fir'c crrrniJgcs as rvcli as sccrrrcthe rrrrr to a
          Gillcttc rr ls in u tliLenrmlrvhcrhcr Lo introclucc FIug as I or carLrir.lgc     'l
                                                                                                  ra:or ltough
     tirc idce lbr FIag rvrs ro IuLc cusLomers:r$'ay       fronr disposablcs, product dr-signhad l,-ccn!c,.,.
     flcxiL.Lc ltt en)'|oiltt of Lin1c,
              trnd                          could bc launchc,l ]-uth as a clrtridgc and as a rlisposablc   rr:or.
        Llcscnior mln u,;c  mcur l'us tiivicle on this issuc. l hc Jisposahlcs gencrrl hnrl ltcn cloil! r erl,
                                              tl                                  in
     *cll iLrrhc marhcL aacl 'c',c c.nsidcrccl r. b. thc 'firture .spcct' of shavi.g styles. iu.rcovcr,
     ciLlrLLL:'sdisposrrhlc    ra:ors, lau.cLrcd irr rctaliati.n t. Bic, rvcre doing bcrrcr rhr. rhc l RAC li
     ihJ r\tra. l Lrl'cvcr, alicr curcfrrl Jclil.crarions,the company anivr'd aL r Lnanrnlr)ssdccision in
      l96E to launch Fleg ns:r cartridgc r:l:of. Thc l)foduct \\,asculLcd,Cillct|e Scnsor.     .
        cilletrc planneclLo pricc dic'ra:or aL$1.75, a lrricc lcss tlian thar ofsomc crrtriclgc rn;ors l.trr
     higlicrthun that ol disposablcs, flojcct a prclniunt irnagc.Lllaclcs
                                     to                                     \,,rrt Lo bc |riccLl at $0.75, I
     2596 price prcmium ovcr Atla arirl about l00lro plemiLrmover Jisl.osal-lcs.    Cillcttc .Jcci.lctlon iLs
     p.icLLrgsttatcgyon thc L.asis.fcosr lrcr sha'e. Disposablelrlacics    cosr $0.035 pcr shrr'c urcl 1or
 Scnsorit rvas$0.06 (afrcrtaking into accountrhat disposablcs
                                                            tcnclcdto proviclc fcrvcrshaycs
 tLru. cirruiclgc       Thc compa'y decidcdro Sensor Janu:rry
                blatlcs).                                   in          i990. Thc cornpany
 spcnt$200 mn on Rr\D anclhaclearnratked I 75 mn lbr adlcrtiserncllr nll
                                          $                        .r l)rumirrr, j\.
    I:or thc launch,oiLiettehird two oprions.'rhcllrst rvirs launchScnsor sclcctcd
                                                              ro                in         mafkctsro
gaugcconsumerrcactiotl, irdjLlst lilarketing camprign lccordingly and graduallybLriLlurvart'1css
of rhc nel'product. The orlreloptionwis ro launchSensor         rhroughout  Anrerica antl Europt-, a
singleblazeofpublicit} This rvaslikely Logct thc atcntion of rhc consuncrsanclshareholders.    N4anv
cxccutivesrvcrefbr rhc fitst option, as it rrotLldgive Clillettesomc time to r(irct rl rhc rmNedirLct
rcsulLsrvcrc not satisfactory'.
                             Also, thcy felr th:it Scnsorr,,luld cannibirli:ethc salcs Atra.
    Holvevcr,aftercarcfulcost-bcncfitan:rlysis, illettc chosethc riskicrstrirtegl'rlith an advcrtising
a.d pro.rorio..1 blitz leaturingidenticalteleviiior commcrcials cvcry .rirrkct.'fhL:$175 m'
aLlvcltisrug  L.udgethad a positivceflecr.Custo'.ersir-r US and the Europcstaqc.lcleurrrring
fbr thc proclucr  evcnbeforeit \\'aslaunchcd.fhc advcrtisi.g                     canrpaigns tobc re'rovecl rhe
                                                                                                    hacl                otT
air asthc company    foundit hard to meetthc clcmancl.                Scnsor       rumcJ out to bc a grcatsuccess          :rnd
accountcd $200 mn of rhe company's 1.6bn ir.r
             for                               $                  sha'ingrevcnues 19o0.ot st Lr..orr.rlc
                                                                                                 lor                   '.
                                  64%had comcflom formcrusers                            oforher non-disposabLe       shavers
                                   (527ofronr Gillcrtc and l27o from competitors)                             and 29% from
      After careful cost-
                                  disposablcs.       Morc encouraging the salcs       rvas                rrendof disposablcs
        benefit analysis,         in Europe anil Americir, rvhich rcmained tlat. This trenrl
       Gillette chose the         continucdand soonScnsor's                         sir:ucof rhc l..iadc kcr rorrchcrl
     risl<ier strateg), with      157o.   Sensor     soldurorethan 8 million razors                     and 400 million blades
      an advertising and          rvithin tl-rree     yearsofits launch, resultir-rg total rcvenucsof6.5
       promotional blitz          billion.          brandcamcto be knorvnasoneof rhe mostsuccessful
      featuring identical                         i
                                  c o n : L n r ( p r o J J i r l r r r n .l r r n d e . . r J c . .

          television            Follorving success
                                          rl-ic       ofScnsor,Gillcttc laiurchcJLhcworncn's
        commercials in       vcrsion 1992,bur rviLh t'lar,
                                     in                I    rvalcr-shaped  handlecrafted a
       every market          femaleindustriaL   clcsigner givc \.vomen
                                                         to              better concrolrvl.rile
                             shlviug. Ir wassoldin rviritcand grccn colorsirnclrhc ploducL
                             rvas instanthit. The compirny    extendccl productlinc rvith
Sensor Excclin 1994,follorved a high-c'd disposrble
                            by                       razorcallcdAgility,.nd a linc ofshaving
       and aftcr-shave
ctc:rrns              productsundcr thc Satin Carebrancl.

The Launch of Mach3

I. Nfay1994,  e'e. bcforcScnsor Excclrvas  firstsold,Gillcrrchrd srarrcd
                                                                       makingpians scnsor's
successor  This procluct
                       wasto bc an improved    version the Scnsor.
                                                       of            Thc namingprocess this
product 1995rvhcn sevcralpore'tial nameslikc vcctor, Synchro,Tiiad a'cl Macl.r3wcre
idcntified.Gillete \\'anrcda name rhar rv.uld appealto all thc malesin rhe rvorld.lfhrough
tlrousands ofone-o.-onc intcrviewsirroundtire rvorld,the M:ich3 namc rvasdcciLlcd.     Macl-r3
iniriallyfaccd increa-scdinternalrcsistancc the cost of the projcctlr,:rs
                                             as                            supposcd run inrcr
millions.ALsomany cxecurives    felt rhat the comprny shouldfirst laulch rvirh a three bladccj
vcrsionof the ScnsorExcel,beforeintroducing altogether
                                                an            ncrvshaving sysrem.
    MachJ tvas  desiSned the fi(stan.lonlyshaving
                         as                          system rvirhrhree  progrcssively
tirat provrrledmen with a closer        in
                                  shave fcq'ersrrokcs  rvith lcssirritatron.The product'sfiargres
          forrvardpivor for a closerirnd morc comforrahleshave,singlcpoinr cartridgcd.cking lor
easyloadi.g, opcn cartridgearchitecturcfbr cirsyri'sing and crgonornicha^dle clcsign improved
hrndling.The new product$'as     expecrcd ourpcrform otherrazors
                                           to           all              including then matket
leedcr,       Scnsor      Excel. Gillcttc'sconsumer                       resrs  indicated       rhtrrrnenprcferredMacl.r3nearly2-to-1
to Sensor        Exccl,irncl y an evenbiggcr
                                    l                              marginoverrivalproducts.              Pricingu,astested 4591,
                                                                                                                         irt    above
t l r " t o f q c n . . r f r c c l . r r r ,llr Lr l r r l , ( o r : u l n c rr e 5 i i L a n i c .
    \Vith the Atr.,rrazor',
                          mcn usedan avcrage to 32 bladcs year.
                                                30             a      This nunber had droppccl to
thc high 20st'irlr thc Lrunchof Scnsorand Sclrsor      Excel.I)ue ro irs supcriorperformance,rhe
uuurber crf l.ladcs to bc used rvith a Mach3 was expectedto drop even furthcr. Bascdon Lhesc
factors and ulsothe succcss ofthe Sensor   (priced a 25% pre:nium),
                                                   at                  Gillettefinalizccl pricing
strategl for Mach]. Thc producr rvaspriccd 35olo    higher than thar ofsensor Exccl ar $6,lf9 ro
$6.99 for thc rirzotanc{a similar incrcasefor biades. furtl.rcrreinforceMac1.r3's
                                                      To                          premium image,
Gillc'ttc'         Mirch3blades packs
                                   in      offour andeighr,asagainsr and l0 for Sensor
                                                                      five                 Excel.
    Whilc Iaunching   Mach3,Gillctrcfollowed    sricr guidelines all aspecrs
                                                                in           ofadverrising,narkcting
 :rndpromotion.GillctrevisullizcdNlach3asa productthat woulcl          h:rvca mass appcal  and irence
 evcryrhingltonr packaging poinr-of-sale
                             ro                tlisplays r.ctaii
                                                        Lo       sales guidclines wascrcatccl    rvith a
 siugleaullience mind ratherthan individualgeographic         markets.  Mach3 packagcs thc US,
 Australia,Gcuranr', Fmnceor Inclir rl'ereidenticirlexceprfor rhe language dre package.
                                                                             on                Gilletrc
                                 dccided on a uniform number of words on thc packages                to
                                 minimizethc neecl dcsignalrerations rhe packaging.
                                                       for                    ro                  Even
                                 the televisio:r the radio advcrtising
                                                  and                       were thc same. silglc
                                 Mach3telcvision                 was
                                                     commrrcial uscdin allcounrrics. creaLing
       While launching
                                 l single look and fecl tc the prorlucr,  Nlach3establishcd gLobal
        Mach3, Gillette
        followed strict
        guidelines in all             Betr.veen  1994and 1998,Gillcrte spcr.rt   more than 9750mn
           aspects of            to bring the product to market, nearly four times rvl-ratit had
          advertising,           spenton the launchofits Scnsor      rirzorThe firsryear's markering
        marketing and            L.udget rvascarmarkedat $300 mn, pushing rire upfront cosr to
          promotion              more.than $1 bn, making Mach3 rhe most expeDsivc          colrsLlmer
                                 producLlaunch in the u'orLl. Of the $100 mn markcting L.udger,
                                 about$ 100ntn rvas    spentin dreUS and$200mn overscas. linc   In
                                 rvith chelr,1ach3        thc
                                                   nan1e, irdvcttisemenrs    fcaruredniachoimagery
                                 ir-itended convcy high-rcch attributesto ir male audicncc.One
           irtivcrtiscutcur                        jet
                         started with a fighter brcaking
                                off                            throughtlrcsound   barricr Machl :urcl
bcginni.g to disinLegratc it c'osscd
                         ^ftcr          Mach2.As thc jer passed lr4ach3
                                                                  thc        mark, rhc pilor rrorphed
into a nan stancling a iutruistic bathroon, rvith a MachS razorflying into his hrnd.
    ForScnsor', Gillcttc had rakcn 16monthsto inrroduce all parrs
                                                          to         ofthe world,bur for lv{ach3,
tirisrvirsachicvedin lcssthan I ycar,MachS'as introdr-rccd North America in JLrly
                                                              in                         1996,in
Europc iurrlRussia
                    i^            1998, Fcbruary
                                       in                   1999ar.rd the rcsrof rhe Asia,Latin
Americr a^LlAtrsrralirby mid-i999. By thc rime Machi rvas     launchccl throughour  the u,orld,ir
clrncd rhc fcputaLiolr          a
                        ofLrcurg bcttcr success Lhanihe senso'.in tht' US, MachJ r:rzors outsold
scns.r f.rrt Loone comparcdwitli Scnsor's    first six monrh"s thc market and oursoltlscnsor
hla,lcstlrrec ro one. Macl-rJ razors gcncratcd $60 mn in rcvcnues   during the lirst six mo',
conrp:irc.l $ 15 mn lor rhc ScnsorFor thc samc
           to                                     pcriod,N1ach3        gcncrated mn in sales
                                                                 blacles         $66
courparerl Scnsor's mn. it{ach3
           ro          520            ra:orsquicklyattaincda 15%narkct share rheUS wirhil
a 1'ear,      Scnsor  haclrakcn trvoycarsto reachthat marketsharcstiirus.
   Lnrer,Cilletteinrroducc.l advat,ced
                           an        femalcshaving systcmcallcclVcnus.\ienus,a unique
                                         fcatures    includcdan o'aL shapcd
                                                tl.rar                       crruidge,
crgonomicalllsuperiorhandle and convcnicDtstoragccompacL  with individuallyscaledrct'lll
                                             increasethe sizeof the female shavingbusiness
          Venus rvasexpectedro significar.rtly
cartridges.                                                                              by
capLuringnew usersand persuading others to trade up from existingproducts.Gillette had spent
ckrscto $300 nn in the developmentand promotion ofVenus.
    ln 2001,GiLleneintrocluced   Mach3 TLrbo,an advanced    triple bladeshavingsysren,rvidr adcled
featuresiike an anti-fiiction bladc thar reducedrhc cutting force necdedto slicc drrough hair, tcr
resultin a much closerand comfortableshave.Gillcttc alsointroduccda line of men'spcrsonalcare
productsthat includedshavegelsand foams,    after-shavcgels,
                                                           lotionsand splashes, antipcrspirants
and dcodorants. 2002,Gillette introduceda disposabLe                        3,
                                                         razorcalledSensor which incorporat6d
several proprietary features threeindepender-rrly
                           like                   springmountedSeruor          protecrcd
                                                                         blades,        microfins
and a uniquely styled ergonourichandle. Sensor3 rvascxpected to be a perfect complementto
Cillette's cartridgerazorproductslike Mach3, lvlach3Tirrbo,SensorExcel and Venus.


Gillette had escabiished strongreputation for bcing an innovator and had spentbillions ofdollars
in R&D. The companyhad investedabout 2% ofits yearlysales R&D everyyear and pianncd
to introduce urany new productsevery year,The company'sgoal ofgenerating 407oofsales liom
productslaunchedin the previousfive yearsactedasa strict guideLine ongoingproducrresearch
alrd development.
   The commcrcial success Sensor,
                            of       SensorExcel, Mach3, Gillette for'\(/omen Venus,Mach3
turbo and Sensor3 highlighted the company's ability to continuously (and profitably) launch
inn-ovativcproducts.In the US wet shavingmarket,Mach3, Gillene for'WomenVenusand Sensor
Excel held the top three market sharepositions.To maintain this competitive position, Gillettc
wasrvorking on a new product rhat would succeedMach3 and Gillette for Women Venus.@

                                                     Prolf SenthilGanesanis Facultl Mernber and
                                                                    Debanjan Bhattacharyaw an
                                                                        lssociate Corsulctmrat
                                                                      ICFAI KnowledgeCerter.

                                                                         Reference l4-03,03-05


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