New York: Procter & Gamble executives say it was striking the
first time they witnessed a man shave while sitting barefoot on the
floor in a tiny hut in India.
He had no electricity, no running water and no mirror.
The
20 US-based executives observed the man in 2008 during one of 300
visits they made to homes in rural India. The goal? To gain insights
they could use to develop a new razor for India.
"That, for me, was a big 'a-ha,'" said Alberto Carvalho, vice
president, global Gillette, a unit of P&G. "I had never seen people
shaving like that."
The visits kicked off the 18 months it took
to develop Gillette Guard, a low-cost razor designed for India and other
emerging markets. Introduced three years ago, Guard quickly gained
market share and today represents two out of every three razors sold in
India. The story of how Guard came to be illustrates the balance
companies must strike when creating products for emerging markets: It's
not as simple as slapping a foreign label on an American product.
To
successfully sell products overseas, particularly in developing
markets, companies must tweak them so they're relevant to the people who
live there. And often, that means rethinking everything from the
product's design to its cost. More companies will have to consider this
balancing act as they increasingly move into emerging markets such as
India, China and Brazil to offset slower growth in developed regions
such as the US.
For its part, P&G has doubled the percentage
of its roughly $20 billion in annual revenue coming from emerging
markets since 2000 to about 40 percent. Ali Dibadj, a Bernstein analyst
who follows P&G, said the Guard razor, which has been used by more
than 50 million men in India, serves as a roadmap for companies seeking
to court emerging markets.
"It made P&G realize how much
investment it really takes to be successful in India," he said. "That's
the art of emerging markets."
India long has been an attractive
country for US companies looking for growth. It has 1.24 billion people.
And its economy is bustling: India's annual gross domestic product
growth was 3.2 percent in 2012, according to the World Bank, compared
with 2.2 percent in the US the same year.
Still, India's
widespread poverty presents challenges for companies used to customers
with more disposable income. India's per capita income is just about
$124 a month, compared with $4,154 in the US, according to the World
Bank.
Gillette has sold razors in India for over a decade. The
company had 37.3 percent market share in 2007, selling its high end
Mach3 razor, which costs about $2.75, and a stripped down Vector
two-bladed razor on the lower end, which goes for about 72 cents.
But
Gillette wanted more of the market. To do that, P&G executives
would have to attract the nearly 500 million Indians who use
double-edged razors, an old fashioned T-shaped razor that has no
protective piece of plastic that goes between the blade and the skin
when shaving. This razor, which makes skin cuts more likely, costs just a
few pennies per blade.
Carvalho, who spearheaded Gillette's effort to grow market share in India, didn't want to rush into designing a product, though.
Gillette
had stumbled once before with its early version of the Vector in 2002.
The version of that razor had a plastic push bar that slid down to
unclog the razor. The bar was added because Indian men have thicker hair
and a higher hair density than their American counterparts. Adding to
that, they often shave less frequently than American men, so they wind
up shaving longer beards.
Gillette, which is based in Boston,
wanted to test the product among Indian consumers before launching it,
but instead of making the costly trip abroad, they had Indian students
at nearby Massachusetts Institute of Technology test the razor. "They
all came back and said 'Wow that's a big improvement,'" Carvalho
recalls.
But when Gillette launched the razor in India, the
reaction was different. Executives were baffled about why the razor
flopped until they traveled to India and observed men using a cup of
water to shave. All the MIT students had running water. Without that,
the razor stayed clogged.
"That's another 'a-ha' moment,"
Carvalho said. "That taught us the importance that you really need to go
where your consumers are, not just to talk to them, but observe and
spend time with them to gather the key insight."
P&G acquired
Gillette in 2005 and the next several years were spent integrating the
companies. But in 2008, the focus on India returned when Carvalho
decided to bring 20 people, ranging from engineers to developers, from
Gillette's US headquarters to India for three weeks.
They spent
3,000 hours with more than 1,000 consumers at their homes, in stores and
in small group discussions. They observed people's routines throughout
the day, sometimes staying late into the evening. They also hosted small
group discussions. "We asked them what their aspirations were and why
they wanted to shave, and how often," Carvalho said.
They learned
that families often live in huts without electricity and share a
bathroom with other huts. So men shave sitting on their floors with a
bowl of water, often without a mirror, in the dark morning hours. As a
result, shaving could take up to half an hour, compared with the five to
seven minutes it takes to shave in American households. And Indian men
strain to not cut themselves.
The takeaway: In the US, razor
makers spent decades on marketing centered on a close shave, adding
blade after blade to achieve a smoother cheek. But men in India are more
concerned about not cutting themselves.
"I worked in this
category for 23 years and I never realized with those insights that's
how they think about the product," said Eric Liu, Gillette's director of
research and development, global shave care.
With that
knowledge, the Gillette team started making a new razor for the Indian
market. In nine months, P&G developed five prototypes.
The
company declined to give specifics on each prototype for competitive
reasons. But they tested things like handle designs, how well the blade
cuts hair and how easy the razor is to rinse.
The resulting Guard
razor has one blade, to put the emphasis on safety rather than
closeness, compared with two to five blades found on US razors.
One
insight from filming shavers was that Indians grip the razors in many
different ways, so the handle is textured to allow for easy gripping.
There's also a hole at the handle's base, to make it easier to hang up,
and a small comb by the blade since Indians hair growth tends to be
thicker.
Next, the company had to figure out how to produce the
razor at the right price. "We had to say 'How do we do this at ruthless
cost?'" Carvalho said.
P&G scrutinised the smallest details.
It cut the number of components in the razor down to 4 compared with 25
needed for the Mach3, Gillette's three-blade razor. They even made the
razor's handle hollow so it would be lighter and cheaper to make.
"I
can remember talking about changes to this product that were worth a
thousandth, or two thousandths of a cent," said Jim Keighley, the
company's associate director for product engineering.
The result?
The Guard costs about one third of what it costs to make the Vector,
Gillette's low-price Indian razor before Guard. Gillette sells the Guard
for 15 rupees, or 34 cents, and each razor blade is 5 rupees, or 12
cents.
The company's strategy seems to have worked. P&G says
with 9 percent market share, Guard has grown share faster than any other
P&G brand in India. And Gillette's market share for razors and
blades in India has grown to 49.1 percent, according to Euromonitor.
That's up from 37.3 in 2007.
