Issue: Consumers Balk at the High Price of Fusion
Commentary by: David
There is a certain trepidation that a critic feels when challenging a huge brand. Especially when that brand has just been validated by the one of the largest and most successful brand factories. But such was the case last September when we challenged Gillette Fusion and the pricing and product strategy behind this new razor. This month in BusinessWeek, our challenge was validated by Robert Berner and William Symonds.
Our argument in a nutshell was that Gillette had created a monopoly in the shaving business (which had evolved into a minor duopoly when Schick regained some luster with the Quattro) where pricing increases over a decade had far exceeded the innovation delivered to the consumer. For all but the most affluent consumers, the marginal increases in shaving closeness delivered by each successive generation of Gillette razor have been outweighed by hefty price increases in the vicinity of 30%. And don’t try buying in bulk. For years, Gillette has been one of the few companies which reverse prices razor blades, making it more expensive per unit to buy 8 than 4. But inertia and residual brand loyalty kept people coming back and bolstered the stock price, netting former CEO Jim Kilts an absolute fortune when Procter & Gamble acquired Gillette last year.
Now consumers are starting to react. According to Berner & Symonds, sales have been disappointing in spite of a record level of spending behind the brand:
For all that, Citigroup analyst Wendy Nicholson figures that Fusion’s market-share growth has been far weaker than what Gillette saw after the Mach3 and M3Power launches. Mach3′s U.S. market share, excluding Wal-Mart and warehouse-club stores, rose from 6.6% in the launch quarter to 11.7% in the second full quarter, she figures. But Fusion’s has hardly budged, from 10.6% in the launch quarter to 10.8% in the second, she adds. “Given that (the Fusion launch) included two Fusion products, we would have hoped that the initial shares would have been considerably higher,” she writes in a recent report.
From the perspective of this advertising blog, this reaction is nothing more than marketing karma balancing the scales. Gillette took advantage of consumers for too long, increase margin and complicating the product in marginally useful ways. Now consumers are reacting. Unfortunately, many of those who created this mess have already cashed out. We pray that the rest will work hard to add real value to this category.