July 21, 2016
When I read the news of Unilever buying Dollar Shave Club I couldn’t help but think of an advisory session I did for a big CPG firm with colleagues Melissa Parrish and Brigitte Majewski a few months ago. One big topic of conversation was how to build a brand today in a media and marketing world that is so fragmented. We had used Dollar Shave Club as an example of how the rules have changed in the post-digital era.
And then I came across this post on the Stratechery blog that analyzes DSC and its disruptive strategy extraordinarily well.
I can’t help but read from this the end of the mass marketing era whose rules P&G is rightly famous for codifying and rigorously training its brand managers in. My conclusions from this example include:
The end of product innovation. Really interesting story about how Gillette’s 5-blade razor bombed. Basically, products reach a point of development that no further improvement is needed. Or at least the added cost of the innovative product didn’t bring commensurate increase in performance to justify it. The model of continuous product innovation hit the wall — certainly a product strategy driven out of a lab and corporate goal to merely increase price and profits hits the wall. DCS listened to customers and innovated not the product, but the pricing and distribution model to solve a different problem than delivering a “better” shave.
The end of mass marketing power. There is an implicit belief that in the past P&G could shove any product down consumers’ throats through its dominance of distribution and advertising. I’m not sure I believe that but even if one did, this example shows that it can no longer be assumed that this model continues into the future. The mass marketing model of spending $100 million to build a new brand with a well-known playbook of the number of SKUs and GRPs goes out the window.
Sharing technology-driven efficiency gains with consumers. Probably the biggest takeaway for me is the way DSC identified ways to use technology to cut costs — and give much of that savings to consumers. Here we see the convergence of Adam Smith’s Invisible Hand + digital transformation + Age of the Customer. A high margin business attracts competitors who find ways to deliver value cheaper and the consumer benefits. The incumbent is confronted with the decision of how long they can defend their business and whether/when to cannibalize it.
Digital’s effect on marketing spend. I’ve had many discussions with my colleagues here about whether digital marketing ultimately expands marketing spend, merely reallocates the same dollars across more touchpoints or ends up decreasing marketing spend. Here the increase in efficiency this digital model created dramatically reduces marketing spend and convenience replaces messaging and the purchase driver.
In the early days of the Internet, I was briefed by a company who was going to use the lower cost of the Internet to compete with Bloomberg in the business information services market. He described his philosophy as “I’m going to take this $10 billion market and turn it into a $4 billion market. But I’m going to take 50% share and build a $2 billion business in the process.” It is fascinating to see this philosophy come to the razor market as well.