What Is Gillette
Gillette is a company that has been in business for over 122 years and is known for revolutionizing the razor industry with the invention of disposable blades. In the late 1800s, men had two options for shaving: straight razors which were considered dangerous, and safety razors which required frequent sharpening. King Gillette, a traveling salesman, came up with the idea for a razor with a detachable, disposable blade that could be thrown away after each shave. He and his friend patented this design and for the next 15 years, Gillette was a market leader and became a million-dollar company. However, in 1921, the patent for Gillette’s razor blade expired and competitors were able to mimic their design, leading to a decline in sales.
What Steps did Gillette take to save the Company?
To save the company, Gillette came up with the “razor blade model” where they sold razors at a low price with low margins and sold blades at a higher margin, encouraging customers to keep buying blades for recurring profit. This model changed the dynamics of the razor business forever.
The razor blade model not only saved Gillette from failing, but it also inspired other companies to adopt similar strategies. For example, the gaming industry started using this model by selling consoles at a low price and making a profit from the sale of games. This is how companies like Sony and Microsoft were able to build successful gaming systems like the PlayStation and Xbox. The digital camera industry also adopted this model by selling cameras at a low price and making a profit from the sale of memory cards and batteries. Kodak was one of the companies that successfully implemented this strategy.
How Amazon Used the Same Strategy
Amazon Kindle also used this model by selling e-readers at a low price and making a profit from the sale of e-books. This model allowed Amazon to establish a strong customer base, which helped them to expand their business into other areas such as streaming services and online shopping.
This business model can be a valuable tool for startups looking to establish a loyal customer base and increase their chances of success. By providing a product or service at a low price and then creating a recurring revenue stream through complementary products or services, startups can build a solid foundation for growth and expansion.
Conclusion
Gillette’s razor blade model has been a revolutionary strategy that has not only helped the company to remain successful for over a century but also inspired other companies to adopt this model and achieve success in their own industries. The key takeaway for startups is that by providing a product or service at a low price and then creating a recurring revenue stream through complementary products or services, they can build a loyal customer base and increase their chances of success.
