The U.S. Men’s Razor-Blade Market: A Competitive Profile

This paper follows the footsteps of five studies: the U.S. Men’s Shaving Cream, the U.S. Beer, the U.S. Shampoo, the U.S. Shredded/Grated Cheese, and the U.S. Refrigerated Orange Juice markets. Porter links high market share with cost leadership strategy which is based on the idea of competing on a price that is lower than that of the competition. However, customer-perceived quality—not low cost—should be the underpinning of competitive strategy, because it is far more vital to long-term competitive position and profitability than any other factor. So, a superior alternative is to offer better quality vs. the competition. In most consumer markets a business seeking market share leadership should try to serve the middle class by competing in the mid-price segment; and offering quality better than that of the competition: at a price somewhat higher, to signify an image of quality, and to ensure that the strategy is both profitable and sustainable in the long run. (2) The technology of producing Razors and Blades has become more complex and consequently more expensive, (3) Producers are now offering many more new feature—and benefits--than ever before that further raise the cost of production, and (4) Many men regard shaving an important part of personal grooming which they regard an “affordable luxury”. Whereas Gillette had positioned itself as a premium brand in the past, it stepped up the ladder and placed Fusion Blades in the Super-premium segment in 2007 and 2008. We also found strong support for the idea, that relative price is a strategic variable. Finally, we discovered three strategic groups in the industry.

handle. However, King Gillette's idea of a permanent handle housing a low-cost disposable double-edge blade varied fundamentally from Star-type safety Razors. Gillette's focus was mainly on the convenience--ease of use--and the economy of a refillable razor and blade system: not just safety (McKibben, 1998, p. 6).

Men's Home-shaving Market Becomes Real
It was not until after America's entry in World War I in 1917 that the idea of a mass market for Men's Razors and disposable Blades became a reality (McKibben, 1998, p. 18). Before, a two-day stubble was quite common among American men (p. 17). However, from its earliest days, Gillette's advertisements have emphasized the "manliness and sexiness of the smooth-shaven man" (p. 18). Following the examples of British and French officers, who encouraged their soldiers to be clean-shaven, the U.S. military began to issue Gillette shaving kits to every U.S. serviceman (p. 19). Even though Gillette sold the kits to the military at a discount, yet it made money on the deal (p. 20).
The benefit of this deal turned out to be far more consequential than a one-time spurt in Gillette's sales.
When the soldiers returned home after WWI, the required habit of clean shaving acquired by millions of servicemen broke down any lingering resistance to self-shaving among the civilian men (McKibben, 1998, p. 20).

Gillette's Strategy of Globalism
The shaving fever was not just restricted to America, it had spread to foreign lands as well. And this is where Gillette's strategy of globalism was beginning to pay off. So, Gillette expanded its European operations by opening a plant in England. In the meantime, Gillette was gaining a reputation for the global character of its operations. A significant advantage of globalism was the wisdom, the corps of its experienced global managers were able to bring to the home-base (McKibben, 1998, p. 21).
In the silver anniversary issue of the Blade, King Gillette observed that his invention had not only revolutionized the shaving market, "but to some degree had altered the habits of mankind" (McKibben, 1998, p. 22). He said that in his travels he found Gillette Razors and Blades "in the most northern town of Norway and in the heart of the Saharan desert where no white man lives" (p. 22). Blade editors claimed that "it is impossible to name any other manufactured commodity with distribution system as great and widespread as Gillette…In every town and city in the world Gillette Razors and Blades may be purchased!" (p. 22).
Although a mere 8% of India's population was literate, Gillette nonetheless produced advertising exalting the virtues of its Razors and Blades in seven regional languages plus English. A spokesman of Gillette boasted that "the name of Gillette is as well known in Bombay as in Boston" (McKibben, 1998, p. 22).

Gillette Super Blue Blade
From the very beginning Gillette was wedded to the "First to market" strategy: a strategy of innovation and constant improvement (Datta, 2010b). In the 1960s Gillette introduced the first blade, each edge of www.scholink.org/ojs/index.php/jepf Journal of Economics and Public Finance Vol. 5, No. 3, 2019 358 Published by SCHOLINK INC. which was coated with silicone-Super Blue. The success of Super Blue ushered in a period when chemistry became as vital as metallurgy to Gillette's production processes. The Super-Blue breakthrough was the result of British-American teamwork: a direct result of Gillette's dedication to globalism. Lab tests showed that silicone-coated Blues resulted in far more comfortable shave than the Blues without the coating (McKibben, 1998, pp. 52-53 Blades that were posing a major challenge to the latter (McKibben, 1998, p. 57).
It seems that Gillette was a following a "complacent' strategy of rushing to get Super Blue on the market, because it was very profitable. Although Gillette scientists had developed a coating that seemed to work with stainless steel, this endeavor was pushed aside in favor of its focus on Super-Blue. So, Wilkinson's stainless-steel coup must have come as a shock to Gillette executives. The problem was that customers loved Wilkinson stainless steel Blades which had instantly become a status symbol (McKibben, 1998, pp. 57-58).
One year after the Wilkinson shock, Gillette finally came out with its own stainless-steel Blades at a price just a little lower than that of the Wilkinson Blades. But Wilkinson was beset with manufacturing problems that made it impossible for the company to distribute its Blades through the entire United States for several months. And soon Gillette was back in the saddle as the undisputed king of the American safety Razor-Blade market (McKibben, 1998, p. 58).

Gillette Trac II 1971
In 1971 Gillette introduced the first twin-blade shaving system. This is an invention that finally brought an end to the long, glorious 67-year reign of King Gillette's double-edge Blades: a revolutionary invention that became the very foundation of the Gillette Co., and made it a commanding force in the razor-blade market around the whole world.

Gillette Atra Plus 1985
Gillette launches Atra Plus, the first razor with a lubricating strip (Note 4).

Gillette Sensor 1990
Sensor was the "first razor with twin Blades individually mounted on highly responsive springs that automatically adjust to the contours of every face" (Note 5; italics added). The hallmark of Sensor was that it was based on the novel idea of shaving facial hair with independently moving twin Blades.
Gillette engineers encountered a quality control problem they had not faced before: to learn to work with electronic scanners that were able to gauge deviations measured in microns: twenty-five thousandths of an inch (McKibben, 1998, pp. 246-247).
One goal of Gillette management in launching Sensor was to reposition Gillette as a premium brand: a maker of high-performance quality razor-blade systems, and to project an image of a company that "understood men and what made them feel good about themselves". A theme that Gillette employs even today is: "Best a Man Can Get" (McKibben, 1998, p. 249 Gillette's blade production process of manufacturing Blades was increasingly becoming more complex, and therefore ever more costly.

Gillette Fusion 2006
Gillette introduces the first five-blade razor: the world's first razor to feature advanced technology on both the front and the back of the blade cartridge.

Gillette Fusion ProGlide Razor with FlexBall Technology 2014
Gillette introduces Fusion ProGlide Razor with FlexBall Technology: "a pivoting razor built to maximize contact with every contour of a man's face" (Note 7).

P&G Agrees to Acquire Gillette Co.
P&G agreed to buy Gillette Co. in a $57 Billion stock deal in January 2005. P&G and Gillette executives argued that this marriage would bring together the marketing and distribution prowess of P&G, whose products are marketed primarily to women, together with Gillette's high-profit Men's razor Blades, which are marketed mainly to men (Wall St. Journal, 2005 Schick introduces first commercial four-blade refillable cartridge (Note 12).

Gillette's Pricing Strategy for Fusion Razors and Blades
It is not unreasonable to suggest that after King Gillette's revolutionary invention of a razor with a disposable twin-edge blade in 1904, Gillette's launch of Fusion in 2006 was a major innovation.
According to Business Wire (2005) Fusion was world's first razor to feature advanced technology on both the front and the back of the blade cartridge. This is how the newspaper characterizes this breakthrough technology: [O]n the front of the cartridge, blades [are] spaced 30 percent closer together than MACH3 blades. The combination of adding more blades and narrowing the inter-blade span creates a "Shaving Surface" that distributes the shaving force across the blades, resulting in significantly less irritation and more comfort.
The Precision Trimmer (TM) blade, a single blade on the back of the cartridge, allows men to easily trim sideburns, shave under the nose and shape facial hair with control (italics added). (2009), suggests that King Gillette not only invented a revolutionary razor-blade system, he also invented a new business model-commonly known as the "razor-blade" model-for businesses that sell two related products that work together in-tandem. He says this model has now become the underpinning of many industries, e.g., VCRs, DVD players, Xbox, e-book readers, and so on. Under this model you sell one product (Razor) at a low price, and then make your money by selling the other product (Blade) at a high price.

Gillette Has Not Followed the "Razor-Blade" Strategy
Picker (2010), however, offers a different perspective. He argues that, between 1904 when Gillette got the patent, and November1921 when that patent expired, Gillette could have played the razor-blade strategy: low price or free Razors, and a high price for Blades. However, Picker adds, the company did not play that strategy when that was the best time to do so. Instead, during this period Gillette insisted on selling its razor at a high price of $5 and premium-priced Blades (also McKibben, 1998, p. 17).
As we have mentioned before, a 90% market share in the Blade market means that Gillette virtually "owns" the market. So, when your nearest competitor Schick has managed to capture just 6% of the Blade market, embracing the "razor-blade" model makes no economic sense, whatsoever.
Clearly, consumers have to replace Blades far more frequently than Razors. As such, Blades are inherently more profitable than Razors. So, when a business introduces a new Razor-Blade model, a strong dose of discounting Razors seems quite reasonable to bolster the sale of Blades. Of-course, as a brand matures, such a discount can be reduced to more normal levels over time.

Gillette Offers Heavy Discount on Fusion Razors to Stimulate Sale of Fusion Blades
As we have mentioned before, Gillette has been following a long-term strategy of innovation and continuous improvement. So, it has constantly introduced new models periodically, such as Sensor, Trac II, Atra Plus, Sensor, and Mach 3. But, as we have indicated below, the launching of Fusion in 2006 was an extraordinary event. As Table 3 shows, Gillette offered a discount on various brands of Fusion Razors that ranged from 41% to 54% during 2008. The data for 2007 was generally comparable to that for 2008, except for Fusion Phenom Razor which carried an astounding discount of 68% that dropped to 49% in 2008.

Gillette Enters the Super-Premium Segment
As we have indicated before, when Gillette introduced Sensor brand in 1990, it began to reposition Gillette as a premium brand. However, with the entry of Fusion, it placed Fusion Blades in the super-premium segment (Table 2). This is in accord with P&G's strategy that it plans to compete in all "price points" except the economy segment, as we have indicated in the next section.

The U.S. Men's Razor-Blade Market-Price-Quality Segmentation Profile
This study is based on U.S. retail sales for 2008 and2007 (Note 14). The data includes total dollar and unit sales, no-promotion dollar and unit sales, and promotion dollar and unit sales (Note 15).
The U.S. Men's Razor and Blade sales for 2008 were, respectively, $111-and $591-Million. This is a market which was virtually "owned" by Gillette in 2008-especially in Men's Blades-with a market share of 90% and 78%, respectively, in Men's Blades and Razors.
In the Men's 2008 Blade market, the pack-sizes ranged from 1 to 20 blades, which were led by the four-pack at 31.1% of dollar sales, followed by 29.4% for the eight-pack. Moreover, in terms of number of units sold, the four-pack sold 80% more than the eight-pack. So, we have focused cluster analysis on the four-pack.
In order to increase sample size, we added eight five-pack brands whose prices were even lower than the lowest-priced four-pack brand in the economy segment.

Hierarchical Clustering as the Primary Instrument of Statistical Analysis
We have used cluster analysis as the primary statistical tool in this study. As suggested by Ketchen and Shook (1996), we have taken several steps to make this effort as objective as possible:  First, this study is not ad-hoc, but is grounded in a theoretical framework, as laid out below.
 Second, we are fortunate that we were able to get sales data for our study for two years. Thus, this data provided a robust vehicle for subjecting cluster consistency and reliability to an additional test.
 Third, we wanted to use two different techniques-KMeans and Hierarchical-to add another layer of cluster consistency and reliability. However, we found Hierarchical cluster analysis to be superior in meeting that test. So, we did not consider it necessary to use the KMeans technique.

Theoretical Foundation for Determining Number of Clusters-And Their Meaning
As already stated, a major purpose of this paper is to identify the market share leader and determine the price-quality segment-based on unit price-it is competing in.
An important question in performing cluster analysis is determining the number of clusters based on an a priori theory. Most consumer markets can be divided in three basic price-quality segments: premium, mid-price, and economy. These three basic segments can be extended to five: with the addition of super-premium and ultra-economy segments (Datta, 1996).
An equally crucial issue is to figure out what each cluster (e.g., economy, mid-price, and premium) really means.
Perhaps a good way to understand what each price-quality segment stands for in real life is to look at a socio-economic lifestyle profile of America. It reveals six classes (Note 16). Each class is associated with a price-quality segment typified by the retail stores where they generally shop: each a symbol of their lifestyle (Datta, 2011).

Guidelines for Cluster Consistency and Reliability
In addition to laying a theoretical foundation for the number of clusters, we set up the following guidelines to enhance cluster consistency and reliability (Datta, 2012(Datta, , 2017(Datta, , 2018a(Datta, , 2018b(Datta, , 2018c:  In general, there should be a clean break between contiguous clusters.


The anchor clusters-the top and the bottom-should be robust. In a cluster-analysis project limited to a range of three to five clusters, a robust cluster is one whose membership remains constant from three-to four-, or four-to five-cluster solutions.
 Finally, we followed a step-by-step procedure to determine the optimal solution. First, we start with three clusters. Thus, the bottom cluster obviously becomes the economy segment and the top cluster the premium segment. Next, we go to four clusters, and tentatively call them: economy, mid-price, premium, and super-premium. Then we go to five clusters. If the membership of the bottom cluster remains unchanged from what it was in the four-cluster result, it clearly implies that the ultra-economy segment does not exist. Next, if the membership of the top cluster also remains the same from a four-to a five-cluster solution, then the top cluster becomes the super-premium segment. This means that even in a five-cluster solution we have only four price-quality segments: economy, mid-price, premium, and super-premium. It implies that either the premium or the mid-price segment consists of two sub-segments (Table 1).

External Evidence to Validate Results of Cluster Analysis
Whenever possible, we have tried to seek external evidence to validate the results of cluster analysis. For example, many companies identify on their websites a certain brand(s) as a premium or luxury brand.
Another case is that of P&G which says that its plan is to compete in all "price points:" super-premium, premium, and mid-price except the economy segment (Datta, 2010b).

Testing Hypotheses
 I-That the market-share leader would be a member of the mid-price segment.
 II-That the market-share leader would carry a price tag that is higher than that of the nearest competition.

Men's Razors
In The market leader was Gillette Mach 3, a member of the premium segment, very closely followed by the runner-up Gillette Fusion, part of the super-premium segment.
The results for 2007 were similar to those for 2008.
Clearly, these results do not support our hypothesis that the market leader is likely to compete in the mid-price segment.
Several arguments can be offered to explain this deviation from what we have posited in this study:  As mentioned earlier, the technology for making Men's Razors and Blades has now become quite intricate, based as it is on three fields: metallurgy, chemistry, and electronics, which, in turn, raises the cost of production,  Gillette has been pursuing a strategy of innovation and constant improvement, offering new features-and benefits-than ever before, which has consequently made it possible for it to charge premium prices.


Gillette's virtual monopoly of the industry is another factor, that has enabled it to compete in the premium and super-premium segments.


Many men consider shaving an important part of personal grooming, for which they are willing to pay premium prices: because they regard it an "affordable luxury" (Datta, 2018a).

What Are Private Brands?
It is important to clarify what private brands are. Typically, these are brands made exclusively for individual retailers, e.g., a supermarket, or a drug store. Usually, such brands are targeted at the economy segment, and, as such, are generally sold at prices lower than those of name brands. One reason, retailers like private brands is because private brands tend to be more profitable than name brands (Datta, 2018b(Datta, , 2018c.

Relative Price a Strategic Variable
Finally, we performed one more test to determine the consistency and reliability of the results of cluster analysis in this study. So, for Men's Razors and Blades, we ranked the unit price of each brand-for both 2008 and 2007.
For both products, and for both years, all three measures of bivariate correlation-Pearson, and non-parametric measures Kendall's tau_b, and Spearman's rho-were found to be significant at an amazing 0.01 level! We believe these surprising results became possible only because management in the U.S. Men's Razor-Blade market must have been treating relative price as a strategic variable, as we have suggested.
While the price of a brand, compared to its nearest competition, may change over time, it is unlikely to change much from one year to the next. This is significant not only for the market share leader, but also for every brand no matter which price-quality segment it is competing in.

The Role of Promotion
For 2008 promotional sales of Men's Razors averaged 31.8% of retail sales (Table 3). However, Men's Blades were discounted much less at 11 .4% (Table 4). The data for 2007 was, generally, comparable to 2008 for both Razors and Blades.

Men's Razors
In Table 3 the promotional brand data appears in four groups on the basis of promotional intensity. We offer the following comments to explain the results: . Perhaps, the group realized that to protect its market share, low economy price alone was not going to be enough, and that it also needed to add the sweetener of a moderate level of discount.


The Gillette Mach 3 line, introduced in 1998, falls in the Very Light group (4.6-7.5%) with the top-selling brands with a low discount rate of 5.4% and 6.9%--far lower than over 40% discounts offered by various brands in the new Gillette Fusion line.

Strategic Groups in the Men's Razor-Blade Market, 2008
We found three strategic groups in this market. In Table 5 we present a summary of market share by brand families in the Men's Razor market. Table 6 contains a summary of market share by brand families in the Men's Blade market.

The Procter & Gamble (P&G) Co.
 P&G is one of the leading consumer product companies in the world. In 2018, it had sales of $67 Billion. Gillette is part of the grooming segment which accounts for 10% of its sales (Note 17).

Edgewell Personal Care
 The company was created in 2015 with a break-up of Energizer Holdings. Its annual sales for 2018 were $2.2 Billion (Note 18).

Private Brands
 In 2008 Private Brands had a market share of 4% in Razors, and 2.8% in Blades. Notes.

1.
Brands included here are those with sales>$10,000 in 2008.

2.
Gillette Atra and Gillette Trac II brands do not appear here because they did not offer a 4-pack.

5.
Headblade Razor was excluded from this analysis because it is a specialty razor for shaving heads. Notes. 1.
The brands included here are those whose four-or five-pack sales exceeded $10,000 in 2008. 3. The UPr. of the bottom-eight five-pack brands (with asterisks*) are lower than the UPr. of the lowest-priced four-pack brand (Premier Value). So, they are a valid device to increase sample size.

4.
The market share data is for all pack sizes for each brand.

Conclusion
This study is based on the idea that in most consumer markets, a business in quest of market-share leadership should try to serve the middle class by competing in the mid-price segment; and offering quality superior to that of the competition: at a somewhat higher price to connote an image of quality, and to ensure that the strategy is both profitable and sustainable in the long run. The middle class is the socio-economic segment that represents about 40% of households in America.
Quality, however, is a complex concept that consumers generally find difficult to understand. So, they often employ relative price and a brand's reputation as a symbol of quality.
The history of Men's Razor-Blade Market is literally a history of the Gillette Co., now a part of P&G Co. The Gillette Co. has practically defined the global shaving market since its founding in 1901 by King Gillette. The company serves as a model of commitment to innovation, how to advertise creatively, and single-mindedly pursue global growth into superior results in the market.
The Gillette Co. was founded by King Gillette when he invented a truly revolutionary product for shaving facial hair in 1904: a razor with a double-edge disposable blade so thin that MIT scientists believed could not be done. King Gillette's philosophy was that "We'll stop making razor blades when we can't make them better". He believed that his invention had not only revolutionized the shaving market, "but to some degree had altered the habits of mankind".
King Gillette said that Gillette Razors and Blades can be found "in the most northern town of Norway and in the heart of the Saharan desert where no white man lives". In the silver anniversary issue of the Blade, the editors suggested that "it is impossible to name any other manufactured commodity with distribution system as great and widespread as Gillette…In every town and city in the world Gillette Razors and blades may be purchased!" A spokesman of Gillette said that "the name of Gillette is as well known in Bombay as in Boston".
It was not until after America's entry in World War I in 1917 that the idea of a mass market for Men's Razors and disposable Blades became real. Before, a two-day stubble was quite common among American men. So, the U.S. military began to issue Gillette shaving kits to every U.S. serviceman.
When the soldiers returned home after WWI, the required habit of clean shaving acquired by millions of servicemen broke down any lingering resistance to self-shaving among the civilian men back home.
Gillette has a long history of innovation and continuous improvement: We tested two hypotheses: (1) That a market leader is likely to compete in the mid-price segment, and (2) That the unit price of the market leader is likely to be somewhat higher than that of the nearest competition.
Employing U.S. retail sales data for 2008 and 2007, we found that for both 2008 and 2007, the market leader in the Razor market was not a member of the mid-price segment, but the premium segment. Likewise, in the Blade market the leader was part of the premium segment, not the mid-price segment.
Several reasons can be advanced to explain this disparity: (1) Gillette had a practical monopoly of the industry, (2) Gillette was following a strategy of being at the cutting edge of technology offering new features and benefits that allowed it to charge premium prices, (3) The technology for making Men's Razors and Blades has now become quite complicated, which, in turn, has raised the cost of production, and (4) Many men consider shaving a vital part of personal grooming which they regard an "affordable luxury".
Like DVD players, Xbox, and other products, the Razor-Blade market has a peculiar characteristic that most other markets do not have: selling two related products that work together in-tandem. So, one alternative to compete in such markets is to adopt the "razor-blade" model: selling one product (Razor) at a low price, and then making your money by selling the other product (Blade) at a high price.
However, Gillette has not followed that strategy. With a 90% share in the Blade market, the "razor-blade" model does not make much sense at-all.
Since consumers have to replace Blades far more frequently than Razors, Blades are therefore essentially more profitable than Razors. So, when Gillette introduced Fusion in 2006 it offered a heavy discount on its Razors. For 2008 the discount ranged from 41% to 54%: a discount far higher than the 5%-7% for Gillette Mach 3 Razors, the previous best-seller.
However, Fusion's major competitor was not going to be an outsider, but a member of Gillette's own stable: the market leader Gillette Mach 3. So, Gillette had to indulge in some cannibalism by pitting one of its own against another. Thus, it began promoting Fusion as a five-blade razor "that beat Mach 3 on every attribute, providing Gillette's closest and most comfortable shave ever".