Page 34 - HBR's 10 Must Reads 20180 - The Definitive Management Ideas of the Year from Harvard Business Review

CUSTOMER LOYALTY IS OVERRATED

acquired the brand in 2005 for a reported $57 billion. It was a classic
high-market-share, high-quality business—and we can only assume
from their track records that both Gillette and P&G were extremely
good at getting customers to buy habitually. Clearly they had a
strong cumulative advantage. But that wasn’t enough, because the
business had hit an inflection point.
In July 2016 Unilever agreed to buy Dollar Shave Club for about
$1 billion in cash. The founding entrepreneurs are happy. Their in-
vestors are happy. Their customers are clearly happy. The incum-
bents? Not so much. According to the Wall Street Journal, P&G’s
share of men’s razors and blades had fallen to 59% in 2015. One of
its responses was to launch the Gillette Shave Club. Having seen the
potentially habit-destroying effects of the subscription model, P&G
now offers subscription and delivery for other products—including
expensive Tide Pods.
Twenty years ago it would have been inconceivable that a mar-
keting message could reach 20 million people in a matter of weeks
without massive spending on television and other advertising. But
Dollar Shave Club accomplished that with an entertaining launch
video, promotion on social media channels, and a group of enthu-
siastic brand ambassadors who provided feet on the ground to pro-
mote its products—free.

Leveraging the Familiar Even as You Reinvent

The point of this story is that even a company as storied as P&G
can be taken by surprise. Which brings me to the tricky question,
How can executives balance the formidable power of cumulative
advantage and habit, often associated with a brand, with the need to
refresh their approach?
One practical tactic is to leverage the core skills or capabilities
of an organization in a new format. Target offers an illustrative
case. The company’s roots were in a traditional department store,
Dayton’s, which became Dayton Hudson and eventually Marshall
Field’s. In 1960 its leadership saw an opportunity to reach a market
segment that appeared to be growing but wasn’t well served by the

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