The Gillette Razor Blade Business Model
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Published June 10, 2021
Updated October 20, 2022 |
In 1895, a salesman for the Crown Cork and Seal Company, was talking with his boss, William Painter, inventor of the crown cork. The owner told him:
"King, you are always thinking and inventing; why don't you try to create something like the ‘Crown Cork?’ Something that's thrown away after it is used.... The customer keeps coming back for more. Each new customer becomes a permanent foundation of profit."
The salesman’s last name was Gillette: King C. Gillette, inventor of the Gillette safety razor.
The Origin of the Razor Blade Business Model
- Getting Into Business Requires a Sell
- Staying in Business Requires Sales Optimization
Getting into Business Requires an Initial Sell
In 1895, a salesman for the Crown Cork and Seal Company, was talking with his boss, William Painter, inventor of the crown cork. The owner told him:
"King, you are always thinking and inventing; why don't you try to create something like the ‘Crown Cork?’ Something that's thrown away after it is used.
"The customer keeps coming back for more. Each new customer becomes a permanent foundation of profit."
King held the idea close, but it was a seed that took a while to germinate. His inspiration came as he shaved one morning with a dull straight razor. He wanted a blade that could be used with "no stropping [the polishing of a straight razor blade] or honing" and was so relatively inexpensive that it could be thrown into the trash. Knowing nothing about steel at the time, it was a long process to produce a “safety” razor. But he solved the problem.
The salesman’s last name was Gillette: King C. Gillette, inventor of the Gillette safety razor. On September 28, 1901, the Gillette Safety Razor Company was incorporated, with about $5000 in free cash and 49,997 shares of stock, valued at $10 each – if they could be sold. They were, and another brand of one of today’s Fortune 500 companies was born.
The salesman’s last name was Gillette: King C. Gillette, inventor of the Gillette safety razor. On September 28, 1901, the Gillette Safety Razor Company was incorporated, with about $5000 in free cash and 49,997 shares of stock, valued at $10 each – if they could be sold. They were, and another brand of one of today’s Fortune 500 companies was born.
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From this interaction between a salesman and his boss came a business model commonly called The Razor Blade Business Model: A company sells an initial item at a low price, sometimes even at a loss, to sell more of a consumable, high-profit product later. The process refers to this original usage by the Gillette Company as suggested by William Painter of the Crown Cork and Seal Company. Humorously speaking though, it should probably be called The Crown Cork Business Model.
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Gillette advertisement from 1916
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Now known as Crown Holdings, Crown Cork and Seal Company is a corporation that is older than IBM and in the Fortune 500. In 2017, It was listed in the 333rd position with sales of $8.3 billion. Procter and Gamble, which owns the Gillette brand, was listed at #36 with sales of $72 billion (One hundred and sixteen years later, Gillette still has a 65% market share in the razor and blades market).
Staying in Business Requires Sales Optimization
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These two companies are great historical testimonials on how to optimize the Corporate Sales Process by addressing the most expensive and time-consuming barrier in selling a product: the initial sell. Making that first sell a permanent and lasting foundation, though, requires a chief executive—not just a salesman—who ensures that every corporate process is a “closed-loop process” that consistently reinforces the customer relationship. [Herein lies the power behind both Watson Sr.'s and Jr.'s constant focus on "everyone at IBM is a salesman."]
This is the corporate superstructure which when built on a strong sales foundation enables a company to optimize profitability through its Corporate Sales Processes: making, retaining, protecting, extending and duplicating an initial sell. |
If your Corporate Sales Productivity is falling, do you know which of your processes are broken? If you don’t even know if your sales productivity is increasing or decreasing, you don’t need a consultant. The place to start fixing the problem is by looking a little more deeply into the mirror while shaving each morning; then ask one of your salesmen what he or she sees.
The learning process can be greatly enhanced by understanding the mistakes of others. To read how IBM has failed to optimize its 21st Century Corporate Sales Processes follow this link: [IBM Sales and Profit Productivity].
The learning process can be greatly enhanced by understanding the mistakes of others. To read how IBM has failed to optimize its 21st Century Corporate Sales Processes follow this link: [IBM Sales and Profit Productivity].
