Download Gillette has some decisions to make regarding the launch of its

Gillette Sensor Launch
McCartan – EMBA 26
6/25/06
Gillette has some decisions to make regarding the launch of its Sensor shaving system. They are
wrestling with how aggressively to launch a new shaving system, which markets to focus on, and
how much to commit to marketing this new product. The decisions in front of them will
significantly impact the future of the organization.
We agree with Gillette proceeding with Sensor as a cartridge system. The cartridge and
disposable segments seem very different. Exhibit 1 shows two indifference curves we have
approximated. By segmenting the market, Gillette could gain more clarity on the level of risk it
is undertaking with the Sensor decisions. The hesitancy in the decisions that lay before them
seem to be around managing the risk associated with the launch of this new product. Mockler
notes that Gillette is prudent, avoiding excessive risks, but aggressively pursuing opportunities.
The Sensor launch seems like an opportunity.
In Exhibit 1 (end of document) we have estimated the new Sensor and the existing Atra shaving
systems positions in relation to the indifference curve for the cartridge segment. The case
mentions that Atra Plus’ introduction in 1985 was moderately successful. The limited success is
probably due to three things: the lubricating strip was not a significant enough innovation to
present consumers with benefits to adopt; there was limited spending on marketing and
advertising; and Gillette may have been trying to remove any perceived switching costs by
simply adding the lubricating strip to the new cartridge and allowing it to fit in the existing
handle. We feel, though, that much of the perceived benefit advantages come from a new razor
handle along with new cartridges. Gillette is on the right track with introducing a new and
improved handle with this new Sensor cartridge system.
The misfire with Atra Plus may be giving Gillette inclination to price the Sensor where much of
the benefit is captured by the consumer. Exhibit 9 shows minimal incremental margin will be
captured by attracting customers from Gillette’s existing market share in North Atlantic (1%
cartridges and 5% disposables). The temptation here might be to try to price the product so as to
grab some of the market share from competitors, giving Gillette 38% incremental profit margin
as a percent of sales. The history of this market does not indicate many switching customers and
currently Gillette holds 70% of the North Atlantic market. We feel Gillette needs to re-consider
the pricing and focus on gaining market share in other places (e.g. Japan), while maintaining
market share in the North Atlantic.
Another possible challenge with Gillette pricing the Sensor too low is that they will be perceived
as being “stuck in the middle”. With a shaving system being an experience good versus a search
good, Gillette needs to position the Sensor as having superior benefits. These benefits are
measured in closeness, comfort, and appearance by the consumer. If the technology that Gillette
has developed is delivering on these measures, they need to promote the measures in their
marketing and price the product in accordance with these increased benefits to the consumer. As
we illustrate in Exhibit 1, we believe that the consumer’s willingness to pay based on the
improved benefits of the Sensor is higher than where we estimate Gillette is pricing this product.
EMBA 797 – Competitive Strategy and Industry Structure – Gillette
Page 1 of 4
The case points out that Gillette’s competitors were quick to copy new products. Trac II was
copied by the competition within five months and other product imitations appeared in 18 and
seven months. Historically Gillette did not pursue patent enforcement because of antitrust
challenges. This tactic needs to be re-thought. The R&D spend needs to be protected to help
Gillette retain its competitive advantage and its position as a technology leader.
Gillette aggressively patented ideas during the Sensor development. Twenty-two different
patents were applied for and obtained by end of 1988. Gillette has access to the patents as an
isolating mechanism for building competitive advantage in the market. To protect the
investment Gillette has made in the development of the Sensor system, it must leverage the
isolating mechanism of the patents. By not pursuing the patents, Gillette maintains market share
but does not increase market share. It is allowing consumers of the competitions’ products to
stay with that brand versus switching to Gillette’s products. Why would they switch if their
brand will be coming with an imitation soon? Image, reputation, and credibility all are important
to protecting the superior benefits of an experience good. By not protecting the patents, Gillette
is not building the consumer view that it is providing superior products. Protecting the patents
will also allow Gillette to further immobilize the resource it has in technology. The equipment
and plants are certainly not very mobile, but the people that developed the ideas and technology
are very mobile. The patents may offer an advertising or marketing advantage; the 22 patents
help Gillette illustrate the innovations they have achieved with Sensor.
Symon’s strategy for Gillette is outlined in the case. A three phase strategy of 1) revitalize
Gillette’s brand name, 2) enhance Gillette’s leadership position through product innovation, and
3) capitalize on the renewed strength of the Gillette brand name by extending it to other men’s
grooming products. We agree with the first two phases of this strategy. We have concerns
regarding phase 3. Gillette has a broad coverage strategy in place today and its “The best a man
can get” theme supports this broad coverage strategy. It serves consumers ranging from
disposables to high end cartridge systems. Gillette has struggled in the past when it has made
attempts to add complementary goods to its offerings. Past attempts at this strategy were
subsequently divested. We propose an alternative for phase 3 of the strategy. Rather than
adding products that might not carry the value of a strong brand and image we propose that
Gillette focus on areas of the world where they don’t have strong market share. Japan is an area
specifically mentioned in the case. It is mentioned that Shick has a first mover advantage in
Japan.
Gillette has a very strong share of the market in the North Atlantic area. It has invested heavily
in R&D and is getting ready to invest more in advertising and adding plant capacity. Gillette
should work to maintain its advantage in the North Atlantic through patent enforcement, new
product innovation, and building on customers perceived benefits through advertising and
delivery of superior products. Solidifying its leadership position in the North Atlantic, Gillette
can then focus on other areas of the world. Rather than allowing Shick to imitate its new Sensor,
Gillette can aggressively go after market share in other areas of the world.
EMBA 797 – Competitive Strategy and Industry Structure – Gillette
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The marketing campaign will be critical to capturing market share in other areas of the world.
Gillette has the opportunity for a first mover play in Japan with Sensor. Marketing campaigns
should be tailored to position Gillette uniquely in different parts of the world market. Rather
than going for a consistency approach, Gillette should customize the marketing campaigns to
either strengthen its leadership position or establish itself as an innovator. The consistency
approach to the marketing campaign as outlined in the case does not support this direction.
Gillette might even consider launching Sensor in Japan or other parts of the world, followed
quickly by a North Atlantic launch. A marketing campaign in Japan promoting first mover status
with new technology could help capture increased market share.
Gillette has made investments in developing the Sensor system. It now needs to ensure it is
capturing appropriate levels of value based on what it can build in the way of perceived benefits
to consumers through advertising and superior product. Building this benefit advantage in new
and existing markets will allow Gillette to price at a point where it can capture more economic
profit than it does today. The investment in plant, equipment, and inventory is a bet that needs to
be made for this new product. It will be important for Gillette to be able to deliver enough
product to the market and let its competition know that it is dedicated to this production and to
protecting its patents.
Exhibit 1 – Indifference Curves for Segmented Market
Cartridge System
Market
Price
Sensor
Atra Plus
Atra
Disposable
Market
Quality
EMBA 797 – Competitive Strategy and Industry Structure – Gillette
Page 3 of 4
This document is a writing sample taken from MBA coursework at Washington University in St.
Louis, MO. The content is a reaction and comment to a case presented during a Competitive
Strategy and Industry Structure course. This document was authored by John McCartan with
input and edits from the rest of his MBA Group.
EMBA 797 – Competitive Strategy and Industry Structure – Gillette
Page 4 of 4