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Posts Tagged ‘Leadership’

It is hard to ignore the increased frequency at which men can be seen with a beard of some form or style on their faces in recent years. Beards have become popular especially among young men towards or in their early twenties. The renewed fashion of growing beards is making troubles for 115+ years old Gillette, once an independent company and since 2005 a division and brand of consumer packaged goods giant Procter & Gamble (P&G). The difficulties for the famed brand of razors and blades caused by changes in shaving habits of male consumers have been further exacerbated by increased competition and the growing shift to e-commerce. Yet above and beyond, Gillette faces a key challenge to defend and sustain its brand equity, arising from its reputation and position of leadership for many years.

Indeed ‘beards’ are far from being uniform. Beards, and facial hair in general, can be thick or thin, with or without a moustache, covering the cheeks or leaving them clear (see for example the  top 15 beard styles described by Gillette). Often enough the beard is not much more than stubble kept growing for a few days. But beards should be more than a matter of avoiding a shave everyday. As said above, there are different shapes and styles of them, and to keep the beard in form and in good appearance, one has to cultivate and nurture his beard on a regular basis.

  • From the late 19th century and through the first half of the 20th century the moustache was the epicentre of facial hair for men. It was a fashionable sign of manhood, and there were some creative and artistic designs of them.

According to figures from 2013, it was estimated that 17% of American men grew a beard of some form in that year, up from 14% in 2009. Beards are particularly frequent among young US men age 18-24: 35% in 2013 compared with 31% in 2009 (Experian Marketing Services, 14 March 2014; the estimate of ‘bearded men’ is based on a definition of men not using any shaving products or men who use electric shavers or shaving cream (foam) fewer than two times per week [to be distinguished from watching men and counting those bearded]).

The problem of Gillette seems to be aggravated, however, by a reduced frequency at which men shave per week. It is increasingly popular to grow a 2-day, 3-day or 5-day beard. If to judge by the frequency of using shaving cream, US men used it 4.5 times per week in 2009 versus 4.3 times in 2013 (mean 3.5-3.6 among 18-24 years old). Therefore, this is not simply a question of whether an individual uses shaving products, particularly disposable razors and blades, but how much one uses them (and thereof pays to buy them). It should be noted that just 15% of young men age 18-24 in the US have had a thick beard (using no shaving products) in 2013 (2009 13%);  among those in the next age group of 25-34 years old this proportion was a minor 5%.

  • In other data (by Mintel) for 2015, 41% of men using shaving products in the US do not shave daily (50% of  18-24 years old, 51% among 45-54 years old). Nonetheless, among those who do not shave daily not all is lost, probably far from it.

Hence, there is a different way, more optimistic, to look at the situation. Many of the men who grow some form of a beard do have to continue to shave regularly enough. First, it can be noticed that many of the young men grow a rather thin and light beard. Second, many grow a beard on part of their faces (e.g., around the mouth) and hence have to keep shaving the remaining areas where facial hair grows. Therefore, instead of looking at how men do not shave or shave less frequently, one should look at the frequency they do shave, when and how. Additionally, men who grow thin and partial beards can be encouraged and advised on nurturing their beards, keeping them in line and aesthetically appearing. In fact, Gillette demonstrates in videos on its country-websites how to do so with their manual shaving products, a step in the right direction (note: similar instructive videos are available from other sources as well). Nevertheless, more emphasis may have to be given to trimmers for cutting off more dense facial hair to offer customers a more complete solution.

Shaving manually with razor blades is a ritual that demands time, patience and care. It involves three main stages and requires the use of supplementary products (e.g., pre-shave lotion, shaving cream or foam). Part of the market of manual razors and blades has been captured years ago, especially in developed countries, by electric shavers for the greater simplicity of shaving with them and also for being safer. In the US, the ratio between shaving methods stands (2013) at about 3:2 — 6 users of disposable razors and blades to 4 users of electric shavers (Experian). Younger men (18-24) tend somewhat more to prefer manual shaving over electric shavers. If it gives any consolation, only 27% of American users of electric shavers apply the machine daily (i.e., 7+ times per week). In addition, users of electric shavers seem to have lowered their frequency of shaving (mean uses per week): 4 in 2009 versus 3.7 in 2013 (18-24 years old use them less frequently to start with, 2.5-2.6). A possible lesson from those revealed figures might be that men in developed countries should not be expected nowadays to shave daily, perhaps only half as frequently, using either manual or electric devices.

In some ways, as suggested below, the management of Gillette can draw back users of electric shavers to using the brand’s razors and blades. First, users of electric shavers may be convinced of a greater accuracy in which Gillette razor blades can be used to keep, for instance, a beard within its intended  border lines. Second, while men may not find the time and patience to shave manually during the week, they may see the benefits of doing so, instead of using the electric shaver, on weekends and holidays when they have more time to groom themselves. It may be possible to widen an already small overlap that appears to exist between the use of electric shavers and the use of disposable razors and blades.

  • P&G also markets the Braun brand of electric shavers (foil covering a straight-line blade). Philips, a leader in electric shavers (round rotary heads), is offering models with or without a pop-up trimmer on back of the handset shavers; a trimmer is also available as a separate device, as may fit the need to separately treat more dense hair. (Royal Philips has been re-aligning its business in the past few years, but it seems to have found a place for its shaving products in the personal care category for men as an extension to health-care technologies).

Gillette looks as an autonomous division of P&G, almost independent from it. It may get even more freedom than other brands in the house of brands of P&G. Indeed, Gillette has been an independent strong brand for many years and is still capable of being a driver of consumer choice without the help of the corporate name of P&G. Moreover, Gillette has been and remains the endorser of product brands such as Sensor (since 1990), Mach 3 (since 1998) and Fusion (since 2006; Fusion has two premium sub-brands ProGlide and ProShield). The three product brands may be strong enough each to share a driving power equally with the endorsing Gillette name. Some consumers may know that Gillette is owned by P&G and they may value the solid backing it can give Gillette, but it seems the P&G name has no more than a role of shadow endorser [1]. The root (US) website of Gillette and its various country-websites make no reference to P&G in their content; the only mention given is a title at the top left corner saying “Part of the P&G family”. This approach thus helps in instilling the notion that Gillette acts as a stand-alone brand (or brand tree).

The cost of replacing the disposable razors (‘handles’) and blades of Gillette has become a key issue for the brand in the last ten years. The ‘heads’ that contain the blades (e.g., Sensor with 2 blades, Mach has 3 blades and Fusion has 5) seem to cause the greater burden for users, especially as they have to be replaced more frequently than the razor on which the ‘head’ is mounted. Gillette has embarked on a major effort in the US to lower their cost and bring back customers — the US website includes a ‘Pricing’ page introducing a special Lower Prices offer on razors and blades (these are recommended retail prices that Gillette is careful to stress it cannot guarantee for every retailer). A similar ‘Pricing’ page appears on the Canadian website but without details of prices, while no such page appears on websites of other countries (e.g., Australia, UK, Germany, Argentina, South Africa). Additionally, Gillette publishes on its American website a ‘Letter to Consumers’ from its employees as part of its effort: showing how they listen to consumers, and expressing gratitude to those who have already returned after trying razors and blades of competitors (attributed to Gillette’s quality advantage and their lower price offering). It begs one to wonder why this effort is limited to North America.

A threat to Gillette has come primarily from online retailers such as Dollar Shave Club (now owned by Unilever) and uprising Harry’s. At first, men reacted to increasing costs of blades by growing beards and shaving less frequently, but then also by turning to online suppliers. Dollar Shave Club was estimated to have an online market share in 2016 of 52.4% on razors and blades, and Harry’s obtaining 9.4%. However, Gillette has also entered into selling its razors and blades online and launched a customer Club in 2014; in 2016 its share online was estimated at 21.2% (CNBC, 7 August 2016, estimate figures provided by Slice [Ratuken] Intelligence). An increasing interest in subscription plans was further noted by Mintel (5 Nov. 2015) — such plans offer razors and blades at lower prices with the advantage of providing also supplementary shaving products; all can be ordered together in convenient packages. Gillette had to adapt to the new conditions, including the shift in consumer behaviour and new market rules (i.e., e-tailing). The subscription scheme of Gillette Club is available mostly in Western countries of North America and Western Europe (notes: in some countries it is labeled ‘On Demand’, and in the scheme described online, orders are set to be fulfilled via retail stores).

  • Gillette was acquired by P&G in 2005 for $57Bn. In May 2018 the Gillette brand was ranked #32 on the List of Most Valued Brands of Forbes, valued at $17.1Bn. Market share of razors in the US has been sliding down during six consecutive years, from 70% in 2010 to 54% in 2016. Since 2012 the sales of Gillette have declined from a peak of $8.3bn to $6.8bn in 2016, and dropped another 3% in 2017 to $6.6Bn. There is an anticipation now that the Club would help to halt the decline in 2018.

The slogan of Gillette, sustained for several decades already, is “The Best a Man Can Get”. Gillette has been thriving for excellence in the area of shaving as a cornerstone of its brand equity. It has won its recognition as a leader based on high perceived quality of its shaving products, especially its razors and blades (as a ‘power brand’, it achieved a central category benefit [‘the closest shave’], and has been continually improving [2a]). An association that resonates with consumers is significant for brand-building; it has to be meaningful and relevant to them. David Aaker and Erich Joachimsthaler noted in their book ‘Brand Leadership’ that Gillette was among the brands “that have high customer resonance because their customer value proposition is highly relevant” [2b]. This could be the prime challenge of Gillette as a brand for the coming years: The high quality of its products is undeniable, but can it uphold its relevance to consumers?

 


In its struggle to bring customers back, a national advertising campaign to persuade men to shave again has missed its target. An Israeli advertising agency (ACW) created a campaign titled ‘The Dad Test’ featuring a ruler for measuring how much a beard or stubble hurts babies by scratching the baby’s face (2017). The campaign stirred protest and anger for being insensitive and aiming low (Mako-Keshet TV, 7 June 2017 [Hebrew]). First, the ‘problem’ the ad caught onto is hardly new. Second, the campaign took an offensive stand by raising a conflict, alienating customers, and thus was shooting in the wrong direction. (ACW is affiliated with international advertising agency Grey; this campaign does not seem to have appeared outside Israel).

The US-based advertising agency Grey New-York launched in the past three years ad campaigns, for American Father’s Day, that seem to adopt a more positive and constructive approach to father and son relations: (1) In 2016, ‘Go Ask Dad’ instead of turning to the Internet (The Drum, 19 June 2016); (2) In 2017, ‘Handle with Care’ featuring a son helping his elderly father shave (AdWeek, 22 June 2017); (3) In 2018, ‘Your Best Never Comes Easy’, meant to redefine or re-establish the brand’s slogan (AdAge, 11 September 2018). A leading theme in these ad campaigns is connecting fathers and sons with a razor product of Gillette as the pivotal mediator. They may also be noted for enhancing a functional benefit of Gillette with an emotional benefit.


 

An approach that may help Gillette paving its way forward is looking through the lens of The Theory of Jobs to Be Done developed by Clayton Christensen [3]. In order to attract customers and keep them, a company has to understand the goal or task the consumers wish to accomplish and focus on how its designated product will help them in making progress towards achieving their goal (i.e., ‘getting the job done’). Furthermore, jobs are context-dependent, that is, in different circumstances or conditions the consumer may need the same product to do differing jobs. In the case of shaving razors and blades, we may posit ‘jobs’ such as: (1) What type of look men wish to display with their beards — does the consumer want to foster a ‘neat and elegant’ look or is he interested in appearing ‘rough and tough’? — from here a company may derive the extent to which razors have to provide a close shave and accuracy; (2) The main concern of male users may be that shaving will be easy and convenient, and without taking too much time (say 10 minutes). An additional goal for shaving may require that it is more economically affordable. Taking these options into consideration, it may prompt Gillette to examine whether consumers can easily distinguish between the different razors it offers and trace which model of razor and blades is most appropriate for the job one wants to accomplish.

The challenges Gillette has to resolve may be divided into two levels. In the short to medium term the brand may be more engaged in tackling the contemporary fashionable trends in growing beards and thereby the shifts in shaving behaviour of male consumers. There is little point in speculating how long this period may last — the brand just has go through it and adjust its product offerings and marketing. In the longer term, more crucially, Gillette will have to be concerned with sustaining the relevance of the brand (e.g., fit for a job) to men, younger and older, and ensuring that associations they hold of the brand remain valid and meaningful. On that depends the future of Gillette.

Ron Ventura, Ph.D. (Marketing)

Notes:

[1] Based on the model of brand architecture in: Brand Leadership; David A. Aaker and Erich Joachimsthaler, 2009/2000; London, UK: Pocket Books (paperback edition, originally published in 2000 by Simon & Schuster UK)

[2] Ibid. 1: [a] (p. 67) and [b]  (p. 89)

[3] Competing Against Luck; Clayton M. Christensen with Taddy Hall, Karen Dillon, & David A. Duncan, 2016; Harper Business (HarperCollins Publishers)

 

 

 

 

 

 

 

 

 

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The initiative of Israel-based company “Better Place” to put electric cars on the roads in Israel, Denmark and other countries suffered a serious blow early this month with the departure of its founder and global CEO Shai Agassi. Whether Agassi resigned voluntarily or was ousted from his post depends on who is asked, respectively, associates close to Agassi or the “Israel Corporation”, the dominant stake holder in Better Place. But even more so if Israel Corporation is right in its position, the action of its executives will not do them good. Agassi has been the visionary, leader and engine behind the fund-raising for the project ($751 million), including the recruitment of Israel Corp. as the main investor in Better Place (~30%) and other investors such as HSBC, General Electric and Morgan Stanley. Since this whole project of electric cars was primarily identified with Agassi, and gained its prestige through him (e.g., received the endorsement of Israeli President Shimon Peres), it may be very difficult pushing forward without him.

At the age of 33, some nine years ago, Agassi has already been recognized as a promising and exceptional entrepreneur and executive with a vision. He first had a vision for a different way for marketing technologies, products and services in high-tech. Yet he has had a furthermore encompassing vision of replacing fossil fuels with other sources of energy for vehicles, settling eventually on electric batteries as the more viable solution. He started promoting his vision while still serving as a senior executive of technology and business development at the global information technology firm SAP (1). Agassi has given up his job at SAP to pursue his initiative to develop and market electric cars, including the network of stations for servicing them. Even though his career path at SAP may have been truncated by his disappointment from not being nominated CEO (quite an ambitious expectation at his age), Agassi still has probably given up other lucrative options in that field to take on a rather risky enterprise all by his own. It should also be reckoned that Agassi has become keen on his idea regarding electric cars, shifting his attention and own energy in that direction, before quitting SAP. Therefore, his move away from the rewarding opportunities in high-tech into a less known territory deserves appreciation.

A genuine contribution of Agassi in employing batteries is to allow drivers to quickly replace them, within a few minutes, when depleted, rather than recharging them for hours. A known weakness of batteries for electric cars valid to-date is that they suffice for about 150 km (90 miles) of drive. That can cause lots of trouble for many inter-city drives, even in small countries like Israel — one may not be able to complete even a return trip without recharging. The process of recharging can take from 7-8 hours using a special high-volt outlet to 20-24 hours using a regular electric outlet (speedy recharge in 30 minutes is possible but will exhaust batteries sooner). Those batteries are very expensive (~$15,000), if compared to the cost of a family car running on benzine or diesel fuels, so buying a new battery for your car is certainly not economical. Hence Agassi offered a model in which (1) batteries are not sold but rented to car owners, and (2) drivers can use a mechanism for swapping batteries in special facilities (looking from the outside like automatic car washing facilities) at service stations of Better Place. In addition, drivers can recharge using special “fueling” installations at service stations or at home.

There are still a number of uncertainties and potential problems that consumers may encounter when applying the solution of Better Place and that probably hamper its adoption in the market. First, the rental schemes, that have already been modified once or twice, can be quite demanding or more expensive than Better Place has tried to portray them. At first they expected drivers to commit to  more than 20,000 kilometres a year to obtain the right to swap batteries for a relatively low fee. Later they offered other schemes that are based on actual kilometers driven but are still economical only if one drives more than 10,000 kilometers a year. There are also membership schemes for recharging at home. These schemes generally imply that drivers may commit in advance every year to expenses that are not lower than those expected from using fossil fuels, at least for now. Also, for a single drive, for instance from Tel-Aviv to Eilat on the Red Sea (approx. 350 km), it has been estimated that driving an electric car will cost 442 shekels while doing the trip in a family car (for example Ford Focus) would cost 436 shekels at the current level of benzine prices (TheMarker, 2 Oct. 2012). The main claim of Better Place is that a trip in an electric car should be cheaper and the difference in cost will increase dramatically with time, but the key question for many drivers is When will that happen?

Second, several uncertainties hover above how the whole operation of re-charging and swapping batteries will work in practice for the consumers-drivers. Better Place makes an impressive effort at explaining the options and its procedures on its website and demonstrating them in their Visitor/Experience Centers, but there is always a gap between theory and reality in-field. For example, how available will stations be on the roads? What will the distances be between stations so that drivers can soon find the next station near them? Agassi promised 100 stations in Israel by the end of this year but so far there are just 40 stations (Financial Times reports on 24 stations already built and 14 to be completed by year-end; in Denmark Better Place has 12 stations built and 6 more expected to be completed by the end of the year). In addition, critics have questioned how swiftly and quickly the operation of the mechanism for swapping batteries would work, particularly during rush hours. Concerns have also been raised about the possibilities for re-charging batteries and the convenience of using them, adding to the consumers’ confusion. The Transportation Ministry in Israel, for instance, is banning for now re-charging at home. And if a special facility can be installed at home, would it be practical only for private houses or also for apartment buildings? There have been talks about saving parking spots in cities with public posts for re-charge but nothing has been done about it so far.

  • More critical aspects have been suggested in the media that may further lower consumer confidence in electric cars (e.g.,  the battery usually weighs some 250 kilograms, adding burden on the vehicle that may hurt its acceleration power and reducing the space left for baggage at the back of the car) [Israel HaYom 5 Oct. 2012). It should be noted that some experts on cars and energy argue against electric batteries as the most efficient substitute to fossil fuels (e.g., vis-a-vis  bio-fuel cells).

People normally have a tendency to stick to the current state of affairs, “the way things are” or the status quo. They are not quick to change the attitudes they hold or the actions they follow (i.e., “habits die hard”). As consumers, people also often prefer the familiar (e.g., product or brand, the way a product is used) and avert uncertainty or risk. In order to change their ways, consumers expect to be convinced or feel that their well-being will be better-off in some significant manner. Unfortunately for electric cars this realisation has not come about yet: On the one hand, there is an established and familiar working solution for fueling cars with benzine or diesel. On the other hand, the new alternative solution for fueling cars with electric batteries is riddled with question marks and is not perceived as a working solution. Fossil fuels have become more expensive is recent years (again) but consumers-drivers do not see shortages yet and the savings from changing to electric batteries, recharging or swapping, are not salient enough. The concerns for reduced convenience and the fear of being stuck on the road appear more readily imminent. It is a matter of time, and it may take several more years for consumers-drivers to see and experience the current “working solution” of fossil fuels as no longer economical nor practical.

The investors, primarily the Israel Corp., display impatience and nervousness towards the slow progress of the initiative as managed by Better Place which can at least in part be understood. It is much more difficult to defend the manner in which Agassi found his way out of the doors of Better Place. The leading investor should have evaluated that this process may take years to get to fruition because of the significance of change expected in consumer behaviour. Unfortunately for the project, the economic climate has changed dramatically to the worse since the initiative came to life in 2006/7, when funds were invested, slowing down many market processes. Nonetheless, Agassi is also responsible for making ambitious, unrealistic forecasts (actually promises), that do not seem close to materialise. He projected that his company will obtain 2-4% of car deliveries in Israel by 2012 but this year he gained only 0.3% market share so far. More seriously, he committed to an order of 100,000 cars from Renault of their co-developed model Fluence ZE by 2016. Yet in the first nine months of 2012 Better Place managed to sell about 460 cars in Israel and an additional 200 in Denmark, far away from target.

Agassi first denied that he was fired and promised to stay on the board of directors to show that he stepped down as CEO in consent to help Better Place try a different managerial approach to hasten their progress. However, his decision a week later to quit the board of directors suggests otherwise. The way Israel Corp. allegedly leaked out the news that he had been ousted, to be replaced by CEO of Better Place in Australia Evan Thornley (2), has offended Agassi and caused him to walk away from his own creation. Shai Agassi has been the living spirit, the champion and visionary of the Better Place approach to electric cars. Visionaries often are not very realistic because of the enthusiasm and the broad and genuine way they approach situations and problems. They are not well understood, are criticised and even ridiculed. But even then the company needed him as a champion and leader of this groundbreaking initiative and should have been much more sensitive and careful to keep him on the team.

Better Place spent much effort and money in marketing activities, especially directed at convincing consumers that the time has come to move to electric cars and that a whole apparatus is ready to serve them. But the consumers are not ready yet, and although many visitors at the experience centers may have expressed strong support for the initiative, there is a persistent gap between attitudes, intentions and actions taken by consumers. Meanwhile the company used $471 millions of the funds, business results are slim, and the patience of investors has been fast dwindling. The time span needed to shift consumer behaviour from cars running of fossil fuels to electric cars or other sources of energy is longer than estimated, and is further extended by the global recession. Given the public interest in the success of such an initiative in the long-term, governments should provide much stronger backing and support to push the process forward and simultaneously give more breathing time to the businesses engaged to continue in their operational and marketing efforts.

Agassi brought his project to Israel in view of its energy problems but also with aim to reinforce Israel’s image as an innovative country. It is an opportunity Israel will be sorry to lose.

Ron Ventura, Ph.D. (Marketing)

(1) Shai and his father sold their family-grown high-tech start-up Quicksoft/TopTier to SAP in 2001 for 400 million dollars (a major stake in the company was acquired earlier in 1998 to a German investment fund for 110 million dollars). Agassi, who gained personally 40 million dollars from the deal, stayed with SAP for six years until 2007.

(2) Todd Woody of Forbes wonders about the choice of Thornley. Woody suggests that if the chair of Israel Corp. Idan Ofer is looking to see a return on their investment in 2-3 years and needs an operative executive who will lead Better Place through the challenges ahead, then Agassi actually has more experience in a senior managerial function than the new CEO. Thornley, formerly a consultant with McKinsey & Co., co-founded a Web directory in the late ’90s in San Fransisco against Yahoo! (Google was still in its infancy) but returned to Australia after the dot-com crash where he became a representative for the Labour Party in Victoria state Parliament until joining Better Place in 2009.

Sources:

“Taking His Keys Away: Shai Agassi, Founder and CEO of Better Place, Is Ousted”, TheMarker (Online — Hebrew), 2 Oct. 2012, http://www.themarker.com/dynamo/1.1834356

“Following His Ousting: Shai Agassi Resigns from the Board of Directors of Better Place”, TheMarker  (Online — Hebrew), 9 Oct. 2012, http://www.themarker.com/dynamo/1.1838903

“Better Place Ousts Founder Shai Agassi, John Reed, Financial Times (Online FT.com), 2 Oct. 2012, http://www.ft.com/intl/cms/s/0/723aa86a-0caf-11e2-b175-00144feabdc0.html#axzz28z0s8Y1O

“What’s Behind Better Place’s Ouster of Shai Agassi?” Todd Woody, Forbes (Online), 2 Oct. 2012, http://www.forbes.com/sites/toddwoody/2012/10/02/whats-behind-better-places-ouster-of-shai-agassi/

“Short Circuit”, Ilan Gatenio, Israel Hayom, 5 Oct. 2012, (“Hashavua” weekend supplement p. 7 — Hebrew)

“Charged”, Sara Leibovich-Dar, Ma’ariv, 5 Oct. 2012, ( “Musaf Shabat” weekend supplement pp. 10-13 — Hebrew)

“Driven: Shai Agassi Audacious Plan to Put Electric Cars on the Road”, Daniel Roth, Wired Magazine Online, 18 Aug. 2008, http://www.wired.com/cars/futuretransport/magazine/16-09/ff_agassi?currentPage=all

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