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GILETTE MACH3.
Term Paper ID:25397
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Essay Subject:
Examines marketing strategy for new razor & effectiveness of campaign. Pricing, distribution, development, promotion, more.... More...
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8 Pages / 1800 Words
7 sources, 16 Citations,
APA Format
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Paper Abstract:
Examines marketing strategy for new razor & effectiveness of campaign. Pricing, distribution, development, promotion, more.
Paper Introduction:
Introduction
More than 20 years ago, NBC's late night comedy show "Saturday Night Live" parodied Gillette's then-popular Trac II razor with a mock commercial advertising the TripleTrac. The TripleTrac featured three blades and a lengthy discussion (including animations similar to those used in the Trac II commercials) showing why three blades were better than one or two. The mock commercial ended with the tag line, "Because you'll believe anything." In mid-1998, Gillette introduced its MACH3 razor, a product which brought back memories of the "Saturday Night Live" parody to some consumers, but which was brought to market after considerable time and effort in development. This research examines the company's marketing strategy with regard to the MACH3, and considers whether the early results indicate tha
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The company invested six years and $75 million in developing theMACH3; an additional $3 million in marketing costs for the first year hasresulted in more than $1 billion invested in the new razor ("Skinned,"1998, p. This also enhances the quality of the shave andimproves the overall performance of the razor. Gillette expects the razor to gain between a 2 percent to 3 percentmarket share of the wet-shave market during its introductory year. Gillette also needs the product to succeed to bolster investorconfidence. Consumer acceptance of the razor has been favorable. 172. For the MACH3blades, Gillette introduced continuous-assembly machinery (the type used inthe beverage industry to fill bottles) so that the cartridges can be puttogether with high levels of precision. Gillette also tested a higher price than the one they eventuallysettled on, but executives felt that although little consumer resistancewas encountered, the higher price was excessive (Maremont, 1998a, p. The razor also uses new technology on the blades themselves. These early razors didnot test high with customer satisfaction: they irritated the skin and didnot produce a shave which was noticeably closer than traditional razors.Gillette and other razor manufacturers focused on introducing differenttechnology (including blades mounted on springs) to their products ratherthan continuing to develop the triple-bladed razor at that time. The Product The MACH3 is a hand-held, nondisposable razor which uses three bladespositioned in replaceable cartridges. 71). Having made that investment, they are likelyto return for the cartridges in the future. (1998, April 15). Robots are usedto move 12, blades at a time within a $2 million machine on whichcarbon is deposited within a vacuum chamber. By introducing real innovations resulting ingreater benefit to the consumer, and by adopting an aggressive distributionstrategy, the company hopes to maintain its market stronghold. Much ofthat market share is likely to come from the company's own Sensor razor,which held a nearly 34 percent market share in 1997, but the company alsohopes to pull consumers from competing razors, including disposables(Clark, 1998, p. As anticipated,consumers are impressed with the closeness of the shave, but some are putoff by the high price of the cartridges. Gillette will be providing a high level of promotional support for theMACH3, but that support will come in the form of saturation advertising,including print and television. While such success may be due in partto initial curiosity about the product which may not hold up over the long-term, it also indicates that consumers are willing to pay the higher pricefor the shaver system itself. B1). Distribution Strategy The MACH3 will be sold in the same outlets which sell the company'sother razors, including the SensorExcel. 61). 6 -61. 61. 71. The promotionstrategy will have to support the pricing strategy so that consumers arefavorably disposed to the product even before its first use. B1). Maremont, M. Gillette returned to the triple-blade razor in the early 199 s; thisrazor was able to compete successfully against the company's own Sensor.The difference between this razor and the test units from 2 years earlieris that this razor positioned the blades progressively closer to the faceso that each one shaved closer than the one before. Wall Street Journal, p. Yet another innovation concerns the way that the cartridges areinserted into the razor. By the endof 1999, Gillette plans to have introduced the razor to more than 1 countries. Some economies of scale are associated with the highproduction levels, but the company is also interested in obtaining a timelyreturn on its high initial investment (Maremont, 1998a, p. B1). B1). Promotional Strategy and Costs Of the $3 million budgeted for the first year's promotionalactivities, approximately $1 million will be spent in the United Stateswith the remainder being allocated to international markets ("GilletteTakes Flight," 1998, p. How Gillette brought its MACH3 tomarket. The design was approved by early 1995; at that time the company movedto developing the necessary engineering and production expertise forproduction. Expected Results The distribution strategy indicates that the company expects the razorto achieve market dominance shortly after its introduction. The pricing strategy puts the MACH3 at approximately 35 percentmore than the company charges for its SensorExcel cartridges. 11). The Economist, pp. Kaye, S. A Japanese company, KaiCorporation, introduced the K-3 in Japan in early 1998. U.S. More than 1.2billion cartridges are slated to be produced by the end of 1998, and thecartridges have production costs half-again as high as those for theSensorExcel. To overcome this problem, theydesigned the cartridge "docking" system so that the cartridge can only beinserted right-side up. A "starter package," which includes the razor,two cartridges and a cartridge organizer, is available for between $6.49and $6.99. Development Strategy and Costs Gillette first approached the idea of a triple-bladed razor in 197 ,five years before the "Saturday Night Live" parody. This has the neteffect of increasing the price the consumer pays on a per-unit basis. Themock commercial ended with the tag line, "Because you'll believe anything." In mid-1998, Gillette introduced its MACH3 razor, a product which broughtback memories of the "Saturday Night Live" parody to some consumers, butwhich was brought to market after considerable time and effort indevelopment. The pricing strategy is a risky one for Gillette. The Boston facility uses sixmachines costing $15 million each to assemble 6 cartridges per minute(Maremont, 1998a, p. Armed with this newinformation and encouraging test results, Gillette patented the design; thecompany holds 15 patents associated with the product overall ("Skinned,"1998, p. TheMACH3 also shifted the pivot point of the razor from the middle (as is usedon Gillette's Sensor and many other razors) to the bottom in order toincrease the stability of the razor. Despite these minor problems, the MACH3 has enjoyed strong marketacceptance in its earliest stages. (1998, April 18). A cut above? Althougha separate version of the MACH3 will be introduced which is made for women(who are increasingly making up a larger share of the razor market), alaunch date for that product has not yet been announced. Each blade in the cartridge ispositioned closer to the face than the previous blade resulting in a closershave than traditional razors, but with a high degree of comfort. The television ads will focus on the high-tech aspects of the product name and will target a male audience. Gillette estimates that as many as 18 percent ofcartridge razor users put the cartridges on upside down. This also results in small fins onthe cartridge coming in contact with the face first, which helps pull thehairs free from their follicles. (1998, May 1 ). 172). 6 ). (1998, April 18). The Economist, p. Initially, the company willintroduce the MACH3 in the United States, Canada and Israel; this will befollowed by Europe and East European countries later in 1998. Gillette takes flight. In fact, the high level of secrecy associated with theproduct meant that until the last stages of testing, fewer than 1 Gillette employees were able to shave with the razor (Maremont, 1998b, p.A1). By 1998, the company ranked among the 3 largest Americanfirms with capitalization of more than $66.1 billion. However, fears aboutthe company's ability to continue to succeed have caused slow growthrecently, and a successful introduction of the MACH3 would help restoreinvestor confidence ("Taking It On," 1998, p. Cosmetics International, p.11. 172). In addition,Gillette is packaging cartridges for the MACH3 in four-and eight-packscompared to five- and ten-packs for the SensorExcel. (1998, May 13). The company faced severe market erosion due to competitionfrom disposable razors in the 198 s; the introduction of the Sensor helpedto eliminate that problem. Initial sales cannot be usedto predict with absolute accuracy the success of the product over the long-term, but these figures indicate that the product may well succeed to thelevel that its developers planned. 11). Skinned alive. This results in ashave of poor quality, and the company wanted to ensure that consumersreceived the maximum benefit from the razor (or at least did not blame therazor for a less than perfect shave). The companyhas put together a strong promotional program designed to focus on its coretarget market, and has the resources necessary to support the product.What remains to be seen is whether the shaving public is willing to investits own dollars for a closer shave. A1). The company does not currently plan toengage in coupons or slotting, but will instead focus on the benefits ofthe MACH3, its technological improvements and other "institutional"promotional techniques (Clark, 1998, p. B1. Maremont, M. Given that razors are perceived as "commodities" in which oneis much like the next, Gillette will have to put considerable resourcesinto its promotion to ensure that customers perceive strong benefit beforethey enter the store and make the purchase decision. These include discount retailoutlets, supermarkets, and drug stores. Taking it on the chin. Conclusion Gillette has invested significant resources in the MACH3, a product ina category which has a low price point and is generally considered acommodity by many consumers. 61). The company engaged in consumer testing with the MACH3, in whichconsumers rated the shave they received and the product itself highly.However, the company did not test market the product in the sense thatanyone within a particular region could purchase the product for someperiod of time. B1). If consumers do notperceive genuine value for the extra money (particularly when factoringinto account the cartridges), they are not likely to continue to purchasethe razor. Much of the equipment was invented at Gillette for the MACH3;a clean room was built in its Boston facility (to facilitate the new bladeedges) and another is planned for the facility in Germany. The TripleTrac featured three blades and alengthy discussion (including animations similar to those used in the TracII commercials) showing why three blades were better than one or two. (1998, April 14). This is the fastest product rollout in the company's historyand surpasses even the aggressive Sensor rollout, which took five years toachieve such broad market distribution (Maremont, 1998a, p. Since that time, the company, whichmanufactures Duracell batteries, Oral-B toothbrushes and Parker pens, sawstrong growth in the price of its stock as the Sensor gained marketacceptance. However, Gillette was able to coat the blades with amicroscopic layer of carbon resulting in a thinner edge that is three timesharder than steel. This research examines the company's marketing strategy withregard to the MACH3, and considers whether the early results indicate thatthe product will be successful. This has also caused someresistance to the razor (Kaye, 1998, p. The razor also resultsin less irritation than the early prototypes. The Sensor blade production process, which was considered state of theart when it was introduced, results in 2 units per minute. Introduction More than 2 years ago, NBC's late night comedy show "Saturday NightLive" parodied Gillette's then-popular Trac II razor with a mock commercialadvertising the TripleTrac. D. Actual Results Although the MACH3 is the most feature-packed triple-bladed razor onthe market today, it was not the first. Pricing Strategy The razor itself has a retail price of $5; cartridges sell for $1.3 (Maremont, 1998b, p. Wall Street Journal, p.A1. Untilthe MACH3, there had been no major innovations in blade technology sincethe 197 s. (1998, May 4). The K-3 iscurrently only available in Japan, and it does not have the features thatresulted in the high development costs for the MACH3, but its presence onthe market indicates that the lead in technology that Gillette hoped toestablish maybe more tenuous than the company had planned (Maremont, 1998b,p. A1). Gillette is set to make noise with MACH 3.Supermarket News, p. Thispremium pricing strategy carries some risk for Gillette, although thecompany estimates that the increase on an annual basis will amount toslightly more than $7 for most consumers (other analysts calculate that ifthe cartridge is changed weekly, the increase is more than $18 per year)(Maremont, 1998a, p. Razor's edge. In addition, the shifts in thepivot point and the new positioning of the blades themselves results inconsumers having to adjust their shaving habits. One of the television commercials shows a military jet breaking thesound barrier and starting to break up when it reaches Mach 2 (double thespeed of sound). References Clark, C. News & World Report,p. As the jet passes into Mach 3, the pilot becomes a man(using morphing effects) standing in a futuristic bathroom where the MACH3razor flies into his hand ("Gillette Takes Flight," 1998, p.
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