Thursday, June 13, 2019

Don't design product until doing customer price point validation

(draft blog, editing in progress)

I came across these interesting numbers regarding Gillette's razor blade industry dominance (US numbers):

Razor blade industry: $3 billion
Gilette's share: 60%

Where as in India. Gillette's shares were only 22% in 2009. The India market potential was estimated to be 4 times that of the US. One of the reasons, Gillette was losing out in India was it's price point. They were charging around INR 100 (~USD 2) which was found to be higher for local markets.

To crack the local market, the Gillette team carried out extensive research to design an ideal product for the target market. The basis of the research was not just to find must-have and nice-have features but to figure out for which features customers would be willing to pay.

The result:
Gillette was able to build a razor product for India market for INR 15 with replacement parts.
Gillette was able to reduce the components from 25 to 4.
(Source: Book- Monetizing Innovation: How Smart Companies Design the Product Around the Price)

The key learning from this success case is that Gillette didn't even start to design the new product till they had confirmation from the customers about their willingness to pay and their say on what they wanted to see in the product.
Normally, the organizations that are engineering heavy, often lack this discipline to build the products around the proven price point.

What do you think ?

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