Actively encouraging cannibalisation
We often meet brand teams trying to get consumers to "trade up" to more profitable, premium-priced products in their range. The minute we hear about such attempts to "change consumer behaviour", warning signs and dollar bills starting flashing up. Unfortunately, those pesky consumers have a habit of ignoring your portfolio strategy, and carry on buying the basic stuff. That's why supermarkets still stock lots of big box washing powder, not just capsules/tablets/pillows/widgets/wodgets.
However, one brand has managed to pull this off and make money out of it: Gillette. Their strategy has been to launch better and better razors, at higher and higher price points. And with the Fusion razor they have taken this to a whole new level. They are actively encouraging the process of "cannibalisation", where one product in a range eats another.
First, I was amazed to see the advert below doing a classic "side-by-side" comparison that is the marketing weapon of choice of P&G (who now own Gillette) . What was amazing about that? The Fusion is not compared to a competitor. Its compared to Gillette's own Mach 3.
Now, I thought that was really firing up the cannibals. But it gets even more frenzied.
Last week there was a knock on the door. It was a nice sampling lady from Gillette. "Do you have a Mach 3 razor?" she enquired. I confirmed I was hanging on to my Mach 3, put off by the price of the Fusion blades. Her response? She offered to swap my Mach 3 razor and give me a brand new Fusion razor for free in its place. A free upgrade. Who can resist a free upgrade? Not me.
Why the hell do this?
1. Gillette make more profit out of Fusion, sold at a c. 30% premium (£8.27 per 4 pack versus £8.19 per 5 pack of Mach 3). An earlier post talks about this strategy of premiumisation to grow the business.
2. The free razor is a small marketing cost in the big scheme of things. The money comes from the blades. This "system" approach is now widely used. You can but a printer for £60. You then find that the first set of re-fill cartridges cost the same. Similar story with video game consoles like Ninetendo's wii.
3. Gillette have locked me in for another couple of years, and removed any chance I'll switch to another brand when it comes time to upgrade.
4. I bet data-driven P&G had some research data showing that there was a whole load of guys like me who would be interested in upgrading, but were too lazy to get off their arses and buy a new razor.
In conclusion, if you do think upgrading consumers to a more premium "cannibal" product can make you more money, don't expect them to figure this out for themselves. Put your cannibal on steroids, and get him in front of your consumer.