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How to Beat a Billion-Dollar Brand

Posted: Sunday February 20, 2022 by effinlazy

You may be thinking, my small business could never compete with a major player in my market. In this blog, I’m going to tell you why you are wrong. 

And we’re not talking the slightly bigger enterprise down the road either, we’re talking billion (and multi-billion) dollar brands here. Big names. Global brands. But with the right marketing strategies, you can still win. Read on to find out how. 

Hint: a lot of it is about confidence. You’ll never be able to scale your business if you are afraid of the competition who are already streets ahead of you. 

Can you Kill A Monopoly? 

As this video points out, it’s not impossible to kill a monopoly. Let’s take the American brand Gillette. You’ve probably heard of them, right? You’ve seen at least one or two of their high-budget men’s razor commercials, featuring big-name athletes and attractive models. 

Owned by Procter & Gamble, this brand is known for its safety razors and other personal care products including shaving supplies. According to Euromonitor, Gillette’s razors are used by 750 million men in more than 200 million countries. Impressive! 

But despite its many past successes, this $14.5 billion (yes, billion) USD brand is one of the first examples that comes to mind when I think of a major global brand that is losing its market share to smaller businesses. 

In fact, according to Forbes, online sellers, specifically Dollar Shave Club, have reduced Gillette’s United States market share significantly over the past decade from a whopping 70% in 2010, to less than 50% in 2017. A 20% decrease in just six years. 

It also appears the company’s overall value is decreasing! According to Forbes, the company’s current brand value is $14.5 billion USD today. But back in 1999, the brand was worth $43 billion, with a brand value alone of $16 billion. You would have expected its brand to be worth far, far more today, wouldn’t you? 

So, what happened? (And no, it has nothing to do with many men now preferring to have beards over being clean-shaven!). 

Gillette’s Crucial Mistakes 

So, how could a small, new company like Dollar Shave Club cause a market leader like Gillette to lose such a large percentage of its market share? Dollar Shave Club doesn’t even manufacture its own razors! It is only a few years old! It doesn’t have nearly the same research and development or marketing budget as Gillette! 

Regardless, during the same five years that Gillette was struggling, Dollar Shave Club grew from a no-frills, $1-a-month subscription razor blade startup to a global brand that was sold to consumer products giant Unilever for $1 billion. 

These two companies were facing the same problems in the same market: one saw tremendous growth and success, the other did not. Let me explain why. 

According to Dollar Shave Club co-founder and former CEO Michael Dubin himself, Gillette made three crucial mistakes from the beginning. They were: 

  1. Gillette was overly dependent on exploiting its razor blade pricing model. 
  2. Gillette was investing big (we’re talking billions) in making extraordinary razors, but consumers didn’t care. 
  3. Gillette was investing heavily in advertising that did not add value to the company. 

Let’s start with Gillette’s razor blade pricing model. Not familiar with this model? It dates back to the early 1900s when salesman and investor King Gillette invented the disposable safety razor. The idea behind the model is to lure in consumers with a low price (low profit margin) razor but overpricing the blades and make a high recurring profit every time that a consumer has to replace their (costly) razor blades. And consumers would pay up because you can’t use a razor without blades! 

The makers of video game consoles such as PlayStation and Sony have a similar model where they sell their consoles at a loss, but games at a high profit margin, to ensure a high recurring income from game sales. 

So, Gillette’s first problem was relying on this model to drive its profits. Consumers felt like they were being gouged and distrusted the brand, making them far more likely to make their purchases elsewhere, at a brand where they felt they were getting more value. Gillette lost its opportunity to build brand loyalty with many consumers. 

Now let’s consider Gillette’s second major failure: investing big in research and development. That’s always a good thing, right? Well, despite Gillette’s investment in producing what it says were far superior razors, many consumers could not tell the difference between these razors, and a more basic model. 

As Dubin explained, while there has been a change in the price of razors in recent years, there has actually been little change in terms of the functionality of razors. In fact, in 2005, a District of Connecticut judge in the United States even ruled that Gillette’s claims about its razors’ ability to offer a better shave were “unsubstantiated and inaccurate.” They also ruled that the product demonstrations in the company’s advertising were “greatly exaggerated” and “literally false.” 

Lastly, Gillette was also spending big on hiring big-name sportsmen but the commercials were, let’s just say, not great. Even a high-budget commercial featuring Argentinian football player Lionel Messi and Swiss tennis player Roger Federer did not go over well (you can watch it here). 

In 2016 alone, Gillette spent $750 million USD on advertising which in turn caused them to increase the cost of their products. But in reality, this advertising was adding no value to the company! 

Where Dollar Shave Club Saw Opportunities 

So what did Dollar Shave Club do to become so successful? They addressed these three key failings of Gillette. Competition and market research can really pay off! 

Firstly, instead of spending big on developing their own razors, Dollar Shave Club entered into an agreement with a South Korean razor manufacturer. The brand sold three, easy to understand products that were exclusively available online, creating a simple supply chain and reducing the brand’s retail costs. 

These savings were passed on to consumers. Dollar Shave Club’s razor blades cost anywhere between 30% to 60% less than Gillette’s. 

Another opportunity exploited by Dollar Shave Club was in regards to its advertising. This brand spent zero dollars on “traditional” advertising (television, print, and radio) and instead focused its efforts on a simple ad that was uploaded on YouTube. 

Can you guess what happened next? Yes, it went viral. Within 48 hours, the company had converted 12,000 consumers into subscribers. Where Gillette has spent millions on its advertising, Dollar Shave Club spent just $4,500 on its advertisement, which was far, far more effective at attracting consumers to its brand. 

So, the obvious question here is, what was so special about this low-budget, low- production value commercial that was uploaded online (where you wouldn’t even see it unless you searched for it or it was shared with you by a friend or by YouTube’s algorithm)?

What this ad did perfectly was address its customers’ pain points. It asked consumers directly: do you want to spend $20 a month on brand name razors? It was brutally honest and clever. It also presented Dollar Shave Club’s products as the perfect solution to their customers’ pain points. No wonder people loved it! 

Finally, Dollar Shave Club was able to foster brand loyalty with its customers (something Gillette was truly struggling to do) with its subscription model. This made it easy for consumers to return to the brand because it happened automatically. Plus, Dollar Shave Club further fostered brand loyalty with its money-back guarantee and the inclusion of free samples, membership cards, and other perks in its deliveries, which showed their customers that they were appreciated. 

In fact, their customers were so happy they told their friends… a lot of their friends! 97% of customers said they were happy to recommend the brand to their friends. While Gilette was losing customers fast, Dollar Shave Club’s skyrocketed. No fancy marketing or product required. Just an in-depth knowledge of their customers’ pain points. 

Three Lessons We Can Learn From Iconic Business Dollar Shave Club

So, razor blade drama aside: you are probably thinking, what can I learn from this that could help me with my business? 

There are three main lessons: 

  1. While good brands spend millions to showcase their products off perfectly in commercials, great brands focus on building a strong relationship with their customers with marketing’s most powerful tool: brutal honesty. 
  2. No matter how many resources you have as a large corporation, if you do not understand the root cause of your customer’s problems, you will not be able to compete. On the flip side of this, if you are a small company that knows exactly what your customers want and need, you will be able to challenge even billion dollar brands. 
  3. In today’s innovation age, don’t lose sight of the most important aspect of your product: functionality. In this case, Gillette spent big on making marginal improvements to their products but Dollar Shave Club gave customers what they wanted: honesty, a functional product, and a good customer experience. 

So, How Can You Beat a Billion Dollar Brand? 

If a startup like Dollar Shave Club can grow into a billion-dollar brand in just five years, it’s possible for your business too. No matter how small your business is, or how large your competition, it can be done. 

What it comes down to is this: if you focus on the consumer and their pain-points, you can build a competitive brand. You always need to consider your customers first, and everything else second. After all, (and this might sound obvious but it’s true) without your customers, your brand won’t survive: they are the beating heart of your business. 

So, how can you develop a deep understanding of your customers? Honestly, this is the one thing you can’t sell without. You need to create customer personas: a detailed description of the person you want to sell to. Customer personas will also give you extreme clarity and focus when it comes to your offering (you can throw the ‘what-ifs’ out the window!). This will not only tell you what to do, but what not to do. 

As part of this, you need to consider their pain points (in life and work), their biggest challenges, how they currently try to solve these challenges, their values, and their likes and dislikes. With this information in hand you can also segment your customers in order to appeal to them with tailored sales and marketing materials. Save time and effort by crafting messages that cut through to a specific person with specific needs, instead of wasting resources trying to appeal to everyone in one go. 

While this sounds like a lot of work, you’ll find (and as the Dollar Shave Club has proven), this effort will deliver a long-lasting return on investment for your brand. As I’ve said before, “knowledge is power” and I can’t think of a more appropriate example of this than customer personas. 

Another piece of the puzzle is brand loyalty. Gillette’s approach left many consumers unable to trust their brand. This is quite obviously not what you want. In addition to providing a great product or service, you need to build a brand your customers will love with storytelling. This needs to communicate the ‘why’ of what you do and backing this up with your actions. Dollar Shave Club promises affordable no-frills razors and it delivered. Brand loyalty secured! 

If you would like to understand your consumers better and build your marketing around their pain points, we should talk. I know a thing or two about how to craft customer personas and a winning marketing strategy. I’ve been helping business owners get to know their customers better than they know themselves for years, and I’m ready to help you get started. You can get in touch here