Commentary

Subscription Model Turns Blades Into Market Share

It’s a subject not openly spoken about in friendly poker games, slow-pitch softball dugouts or at your friendly, neighborhood gazillion-beers-on-tap joint but I can tell you it’s seething in the minds of men across the republic: “Heavens to Murgatroyd, how the heck did it get so expensive to shave?”

Now it’s out there in the open, as the Wall Street Journal is the latest to report (except for us) a story carrying the hed, “A David and Gillette Story. Technology and a Viral Video Are Arming the Tiny Dollar Shave Club For Battle In The Razor Wars.”

The Dollar Shave Club has men in a lather,” writes Emily Glazer. “The e-commerce start-up opened its doors just a few weeks ago, and has already developed a following for its quirky approach to hawking razors and blades for a $3 to $9 monthly fee.” 

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A very funny YouTube video featuring DollarShaveClub.com founder “Mike” that somewhat answers the question of whether the blades are any good (stainless steel, pivoting head, aloe vera lubricating strip) had more than 4,122,226 views as of this morning. (Caution: It’s rated PG-Puberty for use of the “F***ing Great” word, which probably accounts for the relatively small contingent of “dislikes.”)

One of the better lines is “And do you like spending $20 a month on brand name razors? $19 goes to Roger Federer. I’m good at tennis.” Mike, whose full name is Michael Dubin, strolls through his “warehouse” all the while, providing some clever visuals. At one point, Mike passes a guy with his pate fully lathered who is reading The Lean Startup. (Tell me he doesn’t look a bit like Andre Agassi). A tot is poised on a pallet of corrugated boxes behind him, razor in hand. The tagline: “Shave Time. Shave Money.”

Let’s not read too much into the fact that the top comment on YouTube this morning -- “If all commercials were this good, then we would all be broke” -- purports to be from a Gillette employee. The troops at P&G are not quite quivering in their razor strops.

Gillette spokesman Damon Jones tells Glazer that it has been on top of DollarShaveClub.com from day one and it’s not particularly worried, having seen other subscription-based companies come and go. Then there’s the “you don’t want to get in a p***ing match with us over price” argument.

"If you want to spend 10 bucks a month, we have Gillette products available at all of those price points," he points out. 

But Glazer reports that Gillette is indeed sensitive to “consumer gripes” and has been running commercials recently that inform us that we don’t really need to switch blades as often as we probably think we do. Fusion ProGlide blades are said to be good for five weeks, in fact. (Of course, you have to ignore the fact that the evaporated blue strip seems to be telling you otherwise, as the commenter to this dissenting opinion points out.)

Writes J.J. Colao of Forbes, fairly summing up the sentiments of the hirsute everywhere: “I spend $40 a month on razor blades, grudgingly handing over wads of cash for any kind of innovation that promises to lift my face hairs or open my pores or do something with ‘precision.’ Why? Because the act of scraping a blade across my cheeks every morning is so horrible that I’ll pay anything to make it better. Hence my buzzing, five-blade Escalade of a razor.”

Ad Age’s Jack Neff also points out that Gillette has been shifting its focus toward value messaging after a long run where it “has been among the most profitable packaged-goods brands, with regular price hikes and market shares north of 80% in the lucrative replacement-blades market.” But there are other competitors, too. He cites a Schick Hydro 5 digital and direct mail campaign that “has made a superiority claim that would once have seemed unthinkable for a Schick brand heavily outsold by Gillette.”

Neff also sheds light on Dollar Shave Club founder and co-CEO Dubin.  The former NBC page, MSNBC news writer, improv comedian and producer of custom video content for advertisers at Time Inc. built the concept out with friend Mark Levine in a digital incubator in Los Angeles headed by former MySpace CEO Mike Jones.

Should P&G be in a lather about all this? Can online upstarts so readily disrupt the juggernaut that King Gillette unleashed when he first determined that the money was in the blades and not the razors?

Well, not if you do the math, as Alexander Chernev, marketing professor at the Kellogg School of Management, Northwestern University, has done for Bloomberg Businessweek. Bottom line: “Once you figure out the monthly cost of shaving with Gillette, the Dollar Shave Club offer becomes much less appealing: You pay more for what are likely to be lesser-quality cartridges.”

That doesn’t appear to the be case to numbskulls like me, however, because Gillette’s pricing model is based on per-cartridge pricing and “people make errors when converting per-item prices to usage costs.”

“Dollar Shave’s usage-based pricing might prove to be a disruptive innovation of the more-than-a-century-old, per-cartridge pricing model,” Cherney concludes, but not for the reasons you may think. “This disruptive innovation is not technology driven; it stems from behavioral economics that foster a better understanding of consumers’ decisions.”

Turns out you can teach P&G a thing or two. And, no doubt, they’ll absorb it.

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