Razor sales for Gillette and Schick have been declining in the past year. Part of the problem is that there is growing acceptance of the unshaven look in the workplace and hence American men are shaving less. This “vogue for stubble” has opened up new innovation opportunities for products including hair trimmers and beard colorants.
Can Gillette and Schick innovate their way out of this mess? Gillette and Schick have actually been continuously innovating with newer razors including “hydro” technology and “cartridges with micropulses”; these high-priced products have contributed to the problem of declining sales. As the Wall Street Journal points out, “big brands have hit a limit on how much more they can get consumers to pay to shave.” As a result, private label and disposable razor sales are rising to cater to the value-conscious customers.
In their quest for more and more innovations in order to appropriate price premiums from consumers and to enhance stock prices, companies make a catastrophic mistake. They usually innovate on the same performance trajectory because they overvalue incrementalism and strive to make their products bigger and better. Innovativeness could also imply changing to a newer business model (for example, Dollar shave club experimenting with a subscription-based model) or disruptive (Gillette’s 11-cent razor called Gillette Guard in India).
What is the problem with continually innovating on the same dimension as Gillette (and Schick) did? Consumers pay premiums to initially buy these “new and improved” products but at some point, the cost-benefit evaluation just doesn’t work out. If there is no difference in the “perceived quality of shave” between a 3-blade cartridge and a 5-blade cartridge, then consumers would be hard-pressed to pay the price premiums. Bottom line: consumers’ perceptions of the benefits of the innovative products must outweigh the costs they incur. Or else, regardless of whether the innovation is better, they will defect to value-based alternatives that best fit their needs.
Associate Dean for Outreach and Engagement
Professor of Business Administration and
James F. Towey Faculty Fellow and
Executive MBA Academic Director