The Interview that Never Happened XX1V Become a Complete Fool
King Gillette interviewed by MichaelRead
MichaelRead: :You company wasn't the first to sell the product cheaper and make up on sales of consumables yet you did it better. Advertising and promotion made the difference?"
King Gillette: "That spread the word, yes, but it was sheer economics in the part of the user and I knew that once that was known we would have a larger market share of both razors and blades. Let me explain. It cost me 27 cents to make a razor and nine cents for a package of five blades. I sold the razor originally for 75 cents � it was a well-made razor � and sold the blades for 12 cents. The first intent was to sell the razor and make the blades cheaper. Everyone, including Valet, did the same. We were still cheaper than a barbershop shave and the idea of a disposable blade was taking a share of the straight-razor trade but we had no great market share. We made several improvements to the razor but that was countermanded by improvements made by our competitors."
MR: "So you dropped the price of the razor and raised the price of the blades. Years later that was called a brilliant marketing move."
KG: "Not at the time. Some thought I'd loose my shirt. I priced the razor at 55 cents and only raised the price of the blades by a cent. But work out the use of a razor. A man could get a week's shaves from one double-edged blade so a pack of five was a month and a week. A man would get paid twice a month and on the last payday he'd buy a new pack of blades. I would be making two cents extra each month."
MR: "Hold on a second, sir. Every five months he'd have a whole month of blades when he wouldn't buy?"
KG: "True, and he'd think himself saving handsomely, but they were Gillette blades. That was one month he'd use our product without going to the store and maybe being persuaded to buy a Valet strop razor. Valet made a good razor and they wanted our market but when a man has blades in his washroom and they're our blades....you see the advantage?"
MR: "Didn't think of that. I thought it was just the concept of a cheaper razor and higher priced blades."
KG: "It gets better, Mr. Read. With the money we made we improved the blade. We called it 'the blue blade' and charged an extra cent a pack for it. But the price increase was acceptable because it was a better blade. Think of what would have happened if that blade improvement cost had been applied to the razor. We would have had to charge at least a dollar for the razor and at that price Valet would have scooped up our market.
MR: "Didn't your competitors try to match you?"
KG: "A question, Mr. Read. I can give you the names of ten competitors. How many of them are there now? Can you buy Valet blades?"
MR: "No, sir, you can't. They went out of business decades ago. So your point is that they didn't compete."
KG: "Now let me interview you. That's a fancy car you have. What if I said you could have that car at half the price yet you pay an extra on a gallon of gasoline and that money went to the automobile maker? Would you?"
MR: "I'd have to crunch the numbers but I'd have to use a lot of gas to make up the loss of about $25,000 to the maker. It could be possible, I suppose but wouldn't people cut down on driving. On average most do about 10,000 miles a year. Oh, hold on. The automobile maker selling the most economical would get a larger market share."
KG: "Just a thought, sir. You are clean-shaven. What blade do you use?"
MR: "Gillette Mach 3. I checked the price; it's about $10 Canadian for the razor and about the same for four blades so even today Gillette is making money on the blades and not the razor. Okay, I get your point; your company is still in business.
"It's the custom on The Interview that Never Was that you get the last word. Please."
KG: "All the marketing and advertising a company does is wasted if the buyer doesn't feel he's getting a deal on value and price. Note I said 'and' and not 'or'. Yes, I could have cheapened the blades and sold for less yet the quality then would drive my customers to the competition. But what is competition but the difference between one company's value and price to another's? What marketing and advertising does is show that one company's value and price is an advantage to the buyer.
"Ask yourself one simple question: how many companies started at the same time as Gillette and how many are still in business? Advertising and promotion can carry you only so far so why has my company survived across depressions and wars? The answer is that the buyer knows that our value and price is to his advantage. Yes, we could encourage use by making blades that didn't last as long but, as I said, a competitor that took the opposite would take our market. Why more companies don't understand this surprises me.
"If the buyer feels cheated in value or price then no company can continue to exist. This is ever more true when the economy takes a downturn. I will tell you, Mr. Read, of those who will survive the downturn you are in and it's those who hew to making sure their customers get value and price. Those who will fail will take the other track. I can assure you that my company won't take that road."
MR: "Thank you, Mr. Gillette."
Join the best community on the web! Becoming a full member of the Fool Community is easy, takes just a minute, and is very inexpensive.
The Interview that Never Happened XX1V
Become a Complete Fool