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Bolt from the Blue – Established Brands Facing Disruption by Startups

Posted March 28, 2017 by Rashmi D @ 3:04 am

Old style head on clashes of the titans are over…startups, the new kids in town, play by a different set of rules

Old style brand wars were almost like ancient gladiators going at each other head on. While it made for exciting contest, there was also serious cash involved in playing such high stakes games where millions of dollars need to be pumped into promotion alone. As a result, the price of the products for which these brand wars were fought, always kept going up, apparently to meet the cost of the high stakes brand war games. Such brand wars are now outdated because a new set of players have arrived on the scene – the startups, who play by a different set of rules that resemble modern day guerrilla warfare more than the head on clash of titans, e.g. Coke vs. Pepsi, Crest vs. Colgate or Ford vs. Chevy, etc.

Take the case of Gillette which was the undisputed lord of the shaving segment with 71% of market-share. Not anymore, because it has dropped to 59% and could go further down, thereby ending Gillette’s monopoly of the shaving market. Over the years, Gillette focused intently on product innovation, its strength and leveraged it by launching new and presumably more efficient products at an ever increasing premium price. In a way, Gillette set the agenda and the rest followed because they weren’t able to move out of its shadow and think differently. Then came Dollar Shave Club in 2011 with a new game plan that targeted the only weakness in Gillette’s armory – its high price. This caught Gillette unawares and in just 5 years it lost over 15% of its share of the market.

In July 2016, Dollar Shave Club was acquired by Unilever for $1 billion, which pretty much gives an idea of how startups think and operate. They are driven by determined young entrepreneurs who start from the coffee shop or garage, with no hang ups about big business frills like up-market office, huge ad budgets, hot shot marketing team and so on. They do their research well, identify the gaps in the market where they can step in and then go for the knockout blow that momentarily stuns the biggest of the players in the market. They create assets worth hundreds of millions of dollars in the space of a few years and then sell it to a suitor before moving on to another project. Thanks to Dollar Shave Club, the shaving market has leveled out considerably and new startups will arrive with newer ideas to eat into the 59% market share of Gillette, which is still huge.

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