While marketing Gillette products, Procter & Gamble relied on the razor-blade strategy. The use of this approach enabled the company to strengthen the loyalty of clients and derive extra revenues. Furthermore, one should mention that this corporation adopts various types of innovation to retain its competitive advantage. The emphasis on innovation is critical for the sustainability of this organization. These are the main details that can be distinguished.
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Name the type of business model used by P & G for the Gillette brand? Discuss why it has proved appropriate for P&G?
While marketing the Gillette brand, the management of Procter & Gamble (P&G) used the so-called razor-blade strategy. This means that the main product was sold at a relatively low price (Hill & Jones, 2012, p. 239). In this case, one should speak about the razor which was purchased by many clients. However, the complementary elements such as blades were priced rather high (Hill & Jones, 2012, p. 239). To a great extent, this approach was quite successful because the company was able to increase the loyalty of clients. Admittedly, other businesses could also offer similar blades. However, in many cases, they were inferior in terms of quality.
These are some of the main details that can be distinguished. It is important to remember that customers have to pay switching costs if they do not want to buy Gillette blades (Raju, Zhang, & Sorensen. 2011). To some degree, they became dependent on the company. Overall, the success of this strategy is one of the reasons why it has been adopted by many other businesses, including those that manufacture technological products (Hill & Jones, 2012).
Currently, the company continues to use this strategy nowadays, even when it markets other products. For instance, one can mention such a cleaning product as Swiffer. Therefore, it is possible to say that this approach is critical for the long-term sustainability of this company and its profitability.
P&G different types of innovation. Using the typology below, can you illustrate with adequate product examples instances where P & G has adopted one or more of the innovation types?
The products offered by Procter & Gamble represent various types of innovation. In many cases, the company relies on incremental innovation which means that this organization only slightly modifies the components of existing products (Pham-Gia, 2011, p. 31). For example, one can speak about such products as Tide with Acti-Lift or Charmin Ultra Soft (Procter & Gamble, 2010). In particular, one should also mention Pampers with Dry Max because this product can be described as a modular innovation. It means that a company introduces a new component without changing the architecture of a product (Pham-Gia, 2011, p. 31).
In turn, the company used a new absorbent gel as a new component. Among other modular, innovations, one can mention the new Gillette Guard. Additionally, it is possible to mention architectural innovation which involves new configuration architecture as well as improved components. For instance, one can refer to a product called Swiffer (Procter & Gamble, 2010). It involves the use of a new solvent contained in a bottle that cannot be opened. At the time, when the product was first released, it was regarded as a significant breakthrough by many buyers (Procter & Gamble, 2010).
One should keep in mind that the corporation incorporates its classification of innovation types. In particular, this organization mentions disruptive innovation, transformational sustaining innovation, and commercial innovation (Procter & Gamble, 2010). Nevertheless, this particular classification does not fully show what kind of changes a product undergoes. These are the main aspects that can be singled out.
Hill, C., & Jones, G. (2012). Strategic Management: An Integrated Approach. New York, NY: Cengage Learning.
Pham-Gia, K. (2011). Radical Innovation and Open Innovation: Creating New Growth Opportunities for Business: Illumination with a Case Study in the LED Industry. New York, NY: Diplomica Verlag.
Procter & Gamble. (2010). Innovation – The Lifeblood of our company. Web.
Raju, J., Zhang, J., & Sorensen, H. (2011). Strategies for Success in Retail. New York, NY: Pearson Education.