Dollar Shave is the underdog success story no one saw coming

Posted on Posted in How to Guide for Marketers

Dollar Shave Club is a subscription-based razor company, founded in 2011 by Mark Levine and Michael Dubin based on the idea that consumers are highly frustrated with the growing cost of razor blades. This is a classic case of finding a major un-addressed problem that consumers are facing in the market. And they use a creative brand solution that helps to turn that problem into a consumer enemy that upsets them emotionally.

We are seeing many brands use new technology options to set up the old guard as the enemy ready for attack. This was the strategy for Netflix on movie rentals, Beats by Dre on the headphone business, Uber against the entire taxi industry, and for Dollar Shave on Gillette. With the cost of a pack of razors going for $20 at your average drug store or even $40 at Costco, there was a huge opportunity in the marketplace. Yes, we’ve seen huge technology gains in the last 20 years with way more blades than we ever thought possible, flex balls and blue lines telling us when to throw it out. But for a great many of us, price still matters.

Competitive positioning options

We’ve always said that brands really have 4 options: better, different, cheaper or else not around for very long. The key is to find a unique selling proposition for your brand. You don’t always need to find a rational point of difference as long as there is room to be emotionally unique.

To find the competitive space in which your brand can win, look up at the three circles above. The first circle comprises everything your consumer wants or needs. The second circle includes everything your brand does best, including consumer benefits, product features, or proven claims. Finally, the third circle lists what your competitor does best.


Your brand’s winning zone (in green), is the space that matches up “What consumers want” with “What your brand does best.” This space provides you a distinct positioning you can own and defend from attack. Your brand must be able to satisfy the consumer needs better than any other competitor can.

Your brand will not survive by trying to compete in the losing zone (in red), which is the space that matches the consumer needs with “What your competitor does best.” When you play in this space, your competitor will beat you every time.

As markets mature, competitors copy each other. It has become harder to be better with a definitive product win. Many brands have to play in the risky zone (in grey), which is the space where you and your competitor both meet the consumer’s needs in a relative tie. 

Sadly, I always have to mention the dumb zone (in blue) where two competitors “battle it out” in the space consumers do not care.  One competitor says, “We are faster,” and the other brand says, “We are just as fast.” No one bothered to ask the consumer if they care about speed. Both brands are dumb.

Dollar Shave has figured out a new business model

The internet has opened up many subscription opportunities, cutting out distribution costs in exchange for a committment to continuous purchases. With the Dollar Shave Club — you sign up for a monthly fee depending on the quality of blades and the number of blades you need per month.

Amazing launch advertising

Dollar Shave took advantage of viral advertising, making such an innovative Ad that it was shared and viewed by up to 18 million people. The ad starring the CEO, who is also a burned out Hollywood actor, was made with such an anti-corporation feel/tone that it jumps off the computer screen. It is a hilarious, edgy, low-budget YouTube-driven video, that generated millions of hits. The tagline is “Our blades are f**king great,” which will undoubtedly alienate many people, but it will inevitably make the younger male audience quickly love them. The ad tells a quirky story of why the brand doesn’t waste money like Gillette does, setting up the idea its razors are much cheaper than Gillette’s. The ad did so well, that it crashed the Dollar Shave website in the first hour!!!  

Here is the ad: “Our blades are F***ing Great”

A craft brand strategy

Craft brands must win a small space in the marketplace that offers something unique to a highly engaged target. These brands succeed when they are far enough away from major competitors that the leaders ignore them because craft brands stay hidden away. 

Craft brands build themselves behind a micro-benefit, including gluten-free, low fat, locally grown, organic or ethically sourced. These craft brands take an antagonistic approach to the rest of the category, portraying every other brand in the category as old-school, overly corporate, unethical, flawed in the manufacturing or the use of ingredients. Many times, these brands take a very aggressive marketing stance, calling out the other brands as unethical or stupid. Craft brands believe it is better to be loved by the few than liked or tolerated by many.

Here are the four key principles brands need to establish a successful craft strategy:

 

  1. Pick a segment small enough that it won’t be noticed and you’ll be able to defend it. Be aggressive. Put all your resources against this small target, so against that specific target, you will have the relative force of a major player.
  2. Be flexible and nimble. You need to enter quickly to seize an opportunity that others aren’t noticing, but be ready to exit if need be, if consumers change their minds or competitors notice you and attack you.  
  3. Explore non-traditional marketing techniques to get your brand message out and your brand into the market quickly. Because you are playing in a non-traditional market, you will be given leeway on the tools you use.
  4. For craft brands, take the mindset that it is better to be loved by the few, than tolerated by the many. Leave the mass consumers for the mass brands.

As Dollar Shave started out, they were up going against one of the biggest consumer goliath brands in the world. Gillette’s global sales are in the billions. A successful niche strategy is when the leader is willing to let you have your space, because they don’t see you as a threat. For Dollar Shave, first-year sales were about $30-50 Million, much smaller than Gillette’s $2 Billiion. That sales level should not even be enough to make Gillette to lose an ounce of sleep.

$50 Million is a ton of money for an entrepreneur

While Gillette did not take Dollar Shave seriously, they didn’t realize they were getting backed into a corner where they could not respond. It would be impossible for Gillette to change their entire business model to counter Dollar Shave. 

  • Gillette can’t risk launching their own subscription model, because it would dramatically upset major retailers, who would retaliate with delistings and reduced support. 
  • Gillette can’t afford to dramatically cut their price or their Sales and profits would nose-dive.

The only strategic move for Gillette is to let Dollar Shave have their $50 million in sales. That’s the beauty of the Dollar Shave strategy.

 

Five years after the launch, Unilever paid $1 Billion to acquire Dollar Shave

click to enlarge

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