Dollar Shave Club Case Notes

Questions to Ponder:

1. What is Dollar Shave Clubs value proposition to consumers? How does it differ from Gillette's?

a. Convenient

b. Cheaper

c. Don’t have to think twice about purchase, it just comes (direct-consumer subscription based)

d. Appeals to higher mobile shopping trend

e. Creates culture around shaving Gillette’s Value Proposition

a. Getting a long history of innovation – Because grandpa used it so will you

b. You can get Gillette when you’re out of town or at a moment’s notice (airports, grocery stores,
supermarkets, etc…)

c. Celebrities/Other significant influencers who say “they use Gillette”, makes consumers think
they can be like them and become like them / resemble their greatness.

2. In which way is Dollar Shave Club's business model a disruptive one?

a. Similar products as Gillette, yet less expensive which creates more value for consumers.

b. Disrupts Gillette business by “riding the winds of change” – more and more consumers are turning to
phones to surf the web and make purchases; DSC is appeasing to consumers demands by creating online
community and making online shopping much easier with subscription-based service. It’s lessening the
effort required to be exhorted by consumers to make a purchase. You get your shaving items when you
need them. Short videos give consumers to tell other consumers something about.

c. Gone are the days when brands tell consumers what to think – short videos allow for
conversation on the internet and generate greater recommendation for DSC product.

3. What are the strategic options open to Gillette in responding to Dollar Shave Club?
Which of these options should Gillette pursue and why?

a. Additional focus on accompanying products – aftershaves, shampoos, body wash, etc… What else
does the target consumer need to become the best man? (The Best a Man Can Get?)

b. Create more value for consumer – This is found with the simple equation “Value = Benefit/Price”.
Either they should focus on adding greater benefits with their products from new innovations or focus
on price reduction to generate higher value. It seems that in the male shaving industry, price is a heavier
influencer in the purchase decision.

c. New approach to promotion of products – Instead of traditional advertising, consider implementing a

more digital approach to marketing. Adopt short video strategy as part of marketing and promotion
strategy. Generate more conversation about brand on social media by giving consumers something to
talk about, generate more likes or follows on social media accounts.

d. Adapt to shift of shopping on mobile devices – More and more consumers are using mobile devices to
make purchase decisions, and DSC appeals to this trend. DSC does not sell its products through
traditional wholesale or retail distribution networks such as drugstores, supermarkets or hypermarkets,
but has subscription-based model (The Club) that is generating more consumers every year.

e. Revitalize customer experience and relationship – Like DSC aims to have customer feel a sense of
belonging to “the Club”, Gillette should further investigate developing a separate customer community
of loyalty. Conduct analysis by asking customers what they value and execute accordingly. Instead of
appearing so serious and distant to the consumer, Gillette should consider speaking to its consumers in
a more personal way. They could accomplish this by creating an application that not only creates brand
awareness but that solves a problem and gives advice. Videos could be generated explaining which
products will give you the best shave according to your skin type or other preferences. Quizzes or other
assessments could be generated to come up with the best shaving cream/after-shave and razors
according to your personal preferences. They can also consider generating related content that its
targeted consumer base would benefit from reading/receiving (Native Advertising) “How to create the
most memorable Valentines for your significant other” would be a good idea for content and falls
directly in line with Gillette’s value proposition to customers of “The Best a Man Can Get”. Gillette
should pursue this strategy because long gone are the days when a brand can tell consumers what to
think, now consumers tell each other what to think about a brand. Gillette needs to appeal to this trend
and facilitate greater conversation on its personal relationship with each consumer in order to generate
higher consumer recommendation, like DSC consumer base who claim ratings averaging 4.7 out of 5 and
a 97% willingness-to- recommend rate on its website.
4. Why would Unilever consider spending $1 billion to acquire a loss-making company like Dollar
Shave Club? What are the implications you can draw from this case for the consumer goods industry
more generally?

a. They don’t have an existing shaving business – DSC shows continued growth with business model and
value propositions proven to be favored with consumers. This model could prove to be even more
effective with the war chest that Unilever has, could leverage company to make profit. Create more
advertising and other marketing efforts with additional resources. Annual revenue has gone up by $196
million since 2012.

b. Consumer goods can often employ razor-razorblade business model for consumers – Get consumers
hooked on initial product to generate favor, but sell consumers on accompanying products.

Case Analysis:

1. Why has Gillette been successful for over 100 years?

a. Tremendous market share – 70% in 2010, 59% in 2015, 54% in 2016.

b. Incremental Innovation – Gillette Trac II (1971), lubricating strip (1985), spring- loaded Sensor (1990),
three-blade Mach3 (1998), and five-blade razor Gillette Fusion (2006).

c. “Give ‘em the razor; sell ‘em the blades” – Utilized approach of using the razor as a loss-leader and the
blades as the profit-driver. Examples: iPod and iTunes, or Nespresso’s single-serve coffee system.

d. $750 Million global advertising budget in 2016 – Out of a P&G’s total advertising budget of some $8.3
billion. (None of this was spent on communicating the functional longevity of replacement blades.)

e. High mark-up of products – Top-of-the-line Gillette Fusion cartridges cost around $0.40 to
manufacture, plus $0.10 for packaging. Retailers retailed Fusion four-pack refills for somewhere
between $19.95 and $24.95 (a mark-up of up 4,700%).

f. Time in the industry – Gillette has been in business for over 100 years, a long time to cultivate brand
loyalty and trust among consumers. This has contributed to easy brand recollection. When people think
of shaving, they think of Gillette.

5. What is Gillette's business model and value proposition?

a. A focus on incremental innovation – Mainly with razors and blades. Once new products are
designed, patents are made to thwart competition with litigation or stop entrants from entering and
competing. With patents, firms can triumph over the competition for a long time to become a leader in
the industry and increase prices, but as soon as patents expire competitors with lower prices can
significantly take away a major consumer base.

b. Significant global advertising budget (Traditional advertising mediums) – Estimated to be around $750
million, above-the-line spending on television, print media and billboards is heavy across the industry.

c. “The Best a Man Can Get” slogan – Gillette not only promised to perform the best, but also to bring
out the best in its user.

d. The razor-razorblade model – Sell razor at a low price (or sometimes even free) to increase sales of
the attached or corresponding good, the razorblade. This generates continuous revenue and creates
market for replacement blades. This model is also used by many other brands to generate higher sales
of accompanying products (gaming systems, mobile apps)

3. What are the strategic options open to Gillette in responding to Dollar Shave Club?

Which option should they pursue and why?

a. Create more value for consumer – This is found with the simple equation “Value =
Benefit/Price”. Either they should focus on adding greater benefits with their products from new
innovations or focus on price reduction to generate higher value. It seems that in the male shaving
industry, price is a heavier influencer in the purchase decision.

b. New approach to promotion of products – Instead of traditional advertising, consider

implementing a more digital approach to marketing. Adopt short video strategy as part of marketing and
promotion strategy. Generate more conversation about brand on social media by giving consumers
something to talk about, generate more likes or follows on social media accounts.

c. Adapt to shift of shopping on mobile devices – More and more consumers are using mobile
devices to make purchase decisions, and DSC appeals to this trend. DSC does not sell its products
through traditional wholesale or retail distribution networks such as drugstores, supermarkets or
hypermarkets, but has subscription-based model (The Club) that is generating more consumers every
year.
d. Revitalize customer experience and relationship – Like DSC aims to have customer feel a sense of
belonging to “the Club”, Gillette should further investigate developing a separate customer community
of loyalty. Conduct analysis by asking customers what they value and execute accordingly. Instead of
appearing so serious and distant to the consumer, Gillette should consider speaking to its consumers in
a more personal way. They could accomplish this by creating an application that not only creates brand
awareness but that solves a problem and gives advice. Videos could be generated explaining which
products will give you the best shave according to your skin type or other preferences. Quizzes or other
assessments could be generated to come up with the best shaving cream/after-shave and razors
according to your personal preferences. They can also consider generating related content that its
targeted consumer base would benefit from reading/receiving (Native Advertising) “How to create the
most memorable Valentines for your significant other” would be a good idea for content and falls
directly in line with Gillette’s value proposition to customers of “The Best a Man Can Get”. Gillette
should pursue this strategy because long gone are the days when a brand can tell consumers what to
think, now consumers tell each other what to think about a brand. Gillette needs to appeal to this trend
and facilitate greater conversation on its personal relationship with each consumer in order to generate
higher consumer recommendation, like DSC consumer base who claim ratings averaging 4.7 out of 5 and
a 97% willingness-to- recommend rate on its website.

6. What is Unilever's aims in acquiring Dollar Shave Club? Is it worth $1 billion?

a. Unilever had no existing shaving business – They lacked direct-to-consumer e- commerce experience.

b. Already have established market presence – With powerful brands such as Axe, Dove, Brut, Suave,
etc… Unilever has the war chest to make further inroads, both in male and female markets across the
world.

c. DSC’s rapid growth – Recently commenced global operations in Australia, Canada, and the UK. Proven
business model and value proposition that was favorable in the consumers eyes.

d. Is it worth $1 billion? – Current revenue is $200 million; revenue increases roughly by $49 million
every year. Currently their value isn’t necessarily $1 billion, but their growth is promising due to digital
disruption and matching consumers favorability. It depends on how much Unilever projects growth will
increase.

7. What are the implications for digital disruption more generally?

a. Higher innovation – Higher sunk costs in research and development

 b. Those who sail with the winds of change usually reap higher benefits – DSC is an excellent
example of this. With more and more consumers shifting over to mobile technology to form
communities and complete purchase decisions, DSC appeased to this trend by creating an online
culture for shaving (The Club). Short videos that attack the idea of paying for unnecessary and
expensive razors and razor blades from Gillette. Subscription eases purchase decision –
appeases to online shopping trend among consumers.

8. What categories and industries remain most susceptible for digital disruption?

a. Technology Products and Services

b. Media and Entertainment

c. Retail

d. Financial Services

e. Telecommunications