CASE: Gillette Indonesia

Q.1) What factors determine the demand for blades? How can demand be increased?

Product attributes: Performance of blade, more specifically, effectiveness (closeness of shave, shaving
time reduction etc), Shelf life (to be able to reuse the blade without reduction in effectiveness) etc play
an important role in determining the demand of the blades.

Social: Increasing awareness of Western grooming practices especially in urban areas. Used by younger
college students and working professionals.

Economic Development/ Income Level: GDP of the country is an important indicator in determining the
purchasing power of the consumers. If the GDP is high, income per capita is going to be high which
means consumers will have more money to buy, in which aesthetic/ luxury products like blades will see
an increase in demand

Western influence on Rural/ Urban population mix: People living in urban areas are believed to be
influenced by the western/ foreign practices through advertisement and mass media. So, percentage of
urban people in the population mix is a determinant for blade demand.

Number of average shaves per month: Those who desire to improve to their image and respond to the
changing norms of the society are going to have higher number of shaves per month. Group of people
that mediate the changes in the society are the trend setters. Trend setters are usually the college and
graduate students. So, growing number of college and graduate students is another indicator to
determining the demand for blades.

Education: To a slightly lesser extent, but, the consumers who are educated about the benefits of the
shaving are bound to realize the higher utility of using blades as shaving tool. So, this is also going to
affect demand.

Biological: The growth rate of beard is different for different ethnic groups and for Asians beards take
longer to grow back so they don’t need to shave so much.

Demand of Blades can be increased in the following way:

1) Increased frequency of use: Best way to encourage people to shave more is by influencing
societal norms. Influencing trend setters and urban people to believe that stubble is
unfashionable will help in increasing shaving, thereby increasing demand for blades.
2) Price: Blades are usually considered luxury item and not a necessity. So, demand for blades is
bound to be very price sensitive. Given that, in countries like Indonesia, most people fall in the
middle to lower income group, so lowering price will mean increased demand for blades.
3) More investment in Promotional activities: This will help in increasing awareness and making
consumers more educated about the benefits of shaving which will lead to increased demand.
 4) Incentivizing consumers to buy: Complementary offers like Shaving creams, gift vouchers,
coupons will help in pulling consumers to buy blades more often which will mean increased
demand for blades.

Q.2) How is Gillette doing in Indonesia? Has Gillette leveraged its first mover advantage?

Gillette Indonesia’s 1995 sales from shaving products were valued at $19.6 million. Through a
combination of volume increase (19%) and price increase (20%), Gillette Indonesia management
projected that this number would increase to $ 27.6 million in 1996. Gillette’s overall gross margin on
shaving products was 46% of gross revenues.

Gillette doesn’t seem to be in a really good position in Indonesia. As the case facts demonstrate,
Indonesia had a population of 196.6 million, with males above age 18 years totaling to 40 million (in
urban areas). Based on the survey conducted in 1995 and the incidence of shaving, total sales of 115
million in an year doesn’t seem to a good figure.

Compared with other brands, the brand awareness for Gillette especially the two blades in the double
edge goal category is quite high, but given the sales figures, this is not translating into business for
Gillette. The problem with exploiting this market to its total potential as a first mover is restricted due to
distribution issues, cultural differences and global marketing emphasis which is not totally suitable for
the Indonesian market.

Q.3) How should Gillette accelerate the development of blade market in Indonesia?

The advertisement budget must be increased to gain awareness and purchase intention among the
illiterate and rural market consumers. This will give a boost to the current sales and will provide scope
for growth. They should also spend on increasing awareness about the category itself as currently the
target population shaves only 5.5 times a month. They should also encourage existing users to use more
sophisticated high margin shaving systems Gillette can also collaborate with more wholesalers, retailers
to improve their distribution and reach. The increase in operational efficiency will lead to increase in
profits ultimately.