The famous Gillette razor and blade strategy may be a myth!
I posted previously that King Gillette clearly had a particular plan in mind when he invented the safety razor and accompanying blades and patented them.
“I am able to produce and sell my blades so cheaply that the user may buy them in quantities and throw them away when dull.”
SPECIFICATION forming part of Letters Patent No. 775,184, dated November 15, 1904
William Painter, who made his fortune inventing the disposable bottle cap, is said to have inspired Gillette. He advised Gillette, a prolific inventor, to invent another disposable item that would create a steady stream of return customers. History then tells us that in 1895, Gillette worked out the idea for a razor blade that could be fit into a holder and replaced when dulled, thereby insuring a sharp blade for every shave – and that steady stream of return. He started to manufacture and sell these razors and blades in 1903.
The famous Gillette razor and blade strategy has long been a staple of business and marketing textbooks. It is not complex, but thought of as rather ingenious.
“The razors-and-blades strategy is a simple one: sacrifice returns – maybe even lose money – on the razor handle but make boatloads
of profits on the blades.”
Randal C Picker, The Razors-and-Blades Myth(s)
Invest in establishing a user base by selling the razor handles at low prices or even giving them away, then sell the razor blades at high prices to justify the prior investment in those handles.
You need to recapture the loses on the handles in the blade sales. To do that effectively, you need to be able to tie the blades to your handle only or your competitors will create compatible blades and undercut you – as they are not needing to recoup the costs of the handle that you have already borne.
Large chunks of modern technological life, with printers being the epitome, seem to operate subject to the same dynamics of razors and blades.
The facts though, according to The Razors-and-Blades Myth(s) by Randal Picker is vastly different, but more complex and interesting!.
“Gillette preferred to sell high-
priced razors and fewer blades to selling cheaper razors and more blades.”
Randal C Picker, The Razors-and-Blades Myth(s)
A Picker points out, from 1904-1921, Gillette could have played razors-and-blades – low-price or free handles and expensive blades – but it did not do so. Instead Gillette set a high price for its handle, high relative to the price of competing razors and the prices of other goods of the day. Instead of playing razors-and-blades they fought to maintain those high prices during the life of their initial patents.
It was only at the point of the expiration of the 1904 patents that Gillette started to utilise something like razors-and-blades strategy, although in a more nuanced way.
Before the expiration of the 1904 patents, the market was segmented, with Gillette occupying the high end and other brands such as Ever-Ready and Gem Junior occupying the low end with sets listing at a fifth of the price.
With the expiration of the 1904 patents Gillette did two things:
- introduced a new, patented, high end handle at the existing high price, and
- dropped its handle prices on a modified variant of the existing handles to match those of its competitors.
The marketing and naming of the high end handles was clearly aimed at showing their ‘new’ and ‘improved’ characteristics, relegating the ‘old’ technology to the equivalent of the bargain bin.
When it comes to Gillette’s pricing strategy for blades they showed a stubborn resilience. From 1909 until 1924 Gillette maintained the same list price for blades. In 1924, Gillette reduced the number of blades from 12 to 10 and maintained the list price, so a real price increase, maybe the first example of ‘shrink-flation’ so common in grocery lines today.
Picker’s paper really is quite an interesting read, and it seems to blow a hole in the often quoted myth of Gillette’s supposed strategy.
Maybe it was simply the case that a Gillette razor was, as they would claim many years later, simply the best a man can get.