dollar shave club case study summary

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[case by case #4] karin kollenz-quétard: dollar shave club – disrupting the shaving industry.

Karin Kollenz-Quétard , EDHEC Professor and member of the Foresight, Innovation, and Transformation Chair , presents a case study (1) on Dollar Shave Club (DSC) , a brand that has disrupted the grooming industry over the past decade. This case study was the overall winner of the prestigious Case Centre's Awards and Competitions in 2021 (2), an event often regarded as the « Oscars » of the case method community. It has remained a bestseller ever since and just made it to the top 2023 best-selling cases (3).

What did the global shaving industry look like before the arrival of Dollar Shave Club (DSC) ?

Prior to Dollar Shave Club's entry, the global shaving industry was dominated by major players such as Gillette and Schick, with a strong retail presence. Customers typically bought razors and blades in stores, influenced by brand recognition and loyalty. Gillette, in particular, led the market with a strategy of selling razors at low prices while charging high price for replacement blades.

The industry heavily invested in marketing to persuade consumers that newer blade technologies offered superior shaves. Gillette's notable investments in R&D, including the development of multi-blade razors like the Fusion — which had 75 design patents and was priced 40% higher than the previous model, Mach3 — were part of this strategy to commit customers to their unique razor handles . Despite these high investments, the industry has only seen sustaining innovation, incrementally enhancing the same product over time. In 2012, DSC's arrival significantly reshaped this conventional business model.

How did « Dollar Shave Club » disrupt the shaving industry and threaten Gillette?

DSC entered the market as a disruptor, using a Direct-to-Consumer (D2C) business model and challenging Gillette's century-long dominance in the shaving industry. DSC's subscription-based model for razors capitalized on consumer frustration with the rising costs of razor blades, offering a more cost-effective and consumer-centred solution.

The company's growth was also propelled by a strong brand and effective marketing that resonated with consumers . They created memorable branding that differentiated them from traditional players. DSC's marketing campaigns were inventive, engaging, and often humorous, which helped in building a significant online presence and capturing market share. DSC's strategy was highly consumer-centric, focusing on convenience, affordability, and customer service, which appealed to a wide audience and improved customer loyalty.

By directly challenging the established giants in the industry, DSC positioned itself as the brand for the ‘smart' consumer , which helped in creating a strong community around the brand.

What came out of this confrontation?

The confrontation between Gillette and Dollar Shave Club led to significant changes in the market landscape, with Gillette facing increased competition and the need to adapt its strategy in response to the disruptive business model introduced by DSC.

Gillette used multiple strategic options to respond to disruption : it defended its market position by filing a patent-infringement lawsuit. At the same time, Gillette increased the competitiveness of its own blades by significantly reducing their price. Additionally, Gillette started to experiment with its own direct-to-consumer model: first under the ‘Gillette Shave Club’ brand selling via Amazon, then selling via its own online-shop under the ‘Gillette on Demand’ or ‘Gillette Club’ names. Additionally, Gillette started diversifying into niche markets, such as assisted shaving (Gillette Treo). Despite these measures, Gillette's market share dropped from above 70% in 2010 to 54% in 2016, after the emergence of DSC and other D2C shaving brands.

And then DSC was acquired?

Indeed, in a strategic move, Unilever acquired DSC in a deal worth about $1 billion . This acquisition was part of Unilever's strategy to gain a foothold in the male grooming market and to challenge Gillette's dominance, Gillette being part of Procter & Gamble, the main rival of Unilever. The acquisition also posed a new threat to Gillette as Unilever planned to use DSC’s direct-to-consumer competency as a vehicle for other product categories within the Unilever group.

However, this move seems not to have been successful . As evident from the sales of the DSC brand to a private equity firm this end of October 2023, Unilever has not been able to capitalize on the specific resources and capabilities of DSC. But this is another story – which might lead to a B-Case…

The DSC case has been a bestseller for three consecutive years (3). What makes the « Dollar Shave Club » case study (1) so successful?

This case is highly versatile and also fun to teach, making it one of my favourites. You can teach it in Innovation courses, but also in Strategy, Marketing or Entrepreneurship courses. The case can be discussed with many audiences, such as MBA/Master Level students, but also with executive or undergraduate audiences. This is also a case that arouses the audience's interest, as it can be told like a « David versus Goliath » story in three acts : a starting situation, a confrontation, and a resolution.

It can serve as a basis for discussion for sessions lasting 45 minutes as well as for 6-hour sessions. It allows changing topic or activity very fast, using tools such as polls, quizzes, and role plays. As we have used it online during COVID, we have included specific tips for teaching it in online sessions in our teaching note.

And last but not least, it is a case that makes everybody laugh, when watching the hilarious DSC’s commercials. After all, there is no better way to learn than by having fun!  

(1) Dollar Shave Club: Disrupting the Shaving Industry - By Nader Tavassoli, Karin Kollenz-Quétard, Jamie Anderson (2018) London Business School case study CS-18-017

(2) Award winner 2021: Dollar Shave Club: Disrupting the Shaving Industry - www.thecasecentre.org

(3) Our 2023 bestselling cases - www.thecasecentre.org

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Kat Greenberg's Blog

Dollar shave club: case study, dollar shave club was founded by mark lavine and michael dubin in 2011. the creators wanted to create a faster, simpler, and cheaper way for men to get razors.  dollar shave club’s target audience was younger men that wanted to save money. think of a broke college student that doesn't want to look scruffy for their first day of class. the generation of thrift shopping and side hustlers.  don't worry they have options for women now too. when lavine and dubin came up with dollar shave club, they created a business model that was so strong it generated $9.8 million in series a funding. meaning they generated that much funding on their first try. wow.

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Dollar Shave Club Business Model: Pioneering the D2C industry

David vs. Goliath. This is a story we have all heard since times immemorial. Recent renditions have taken the shape of business case studies where an “underdog” (early-stage startups) takes on well-established behemoths. One such modern version is the story of a disruptive idea that began with a viral video and became a billion-dollar success story. The company? Dollar Shave Club. The product – the humble razor. 

They grew from a base revenue of $4 million (approx. INR 30 Crores) in 2012 to $240 million (INR 1800 Crores) by 2016. It had about 3 million subscribers when the FMCG giant Unilever finally acquired it for $1 Billion in cash in July 2016 . Presently, DSC is one of the most popular subscription businesses in the US.

From Rags to Riches

Michael Dubin started the Dollar Shave Club. At the time, Dubin was a thirty-three-year-old unsuccessful entrepreneur. During the financial meltdown of 2009, Dubin was laid off from his digital marketing job at Time Inc.’s Sports Illustrated Kids. He had applied to a bunch of business schools but was turned down by all of them. He dabbled with a few other projects before venturing on his ambitious idea of taking on a Goliath named Gillette. 

The idea for a subscription-driven razor company came to him at a holiday party where he met Mark Levine. Mark had purchased a wide assortment of consumer products, including razors and blades. He had a tough time unloading them and enlisted Dubin’s help in selling them. 

The conversation got Dubin thinking about the unpleasant experience of shopping for a Gillette blade at the time. For example, Gillette’s top-of-the-line blade cartridges were priced ridiculously at $5 (INR 375) for a single piece. The blades were seldom stocked since retailers tended to keep the cartridges in locked cases. Their small size made them easy to steal. This became the genesis of DSC. 

The Power of Subscription

While looking to sell the spare blades online, Dubin realized that most people would come once, buy their supplies, and disappear. He decided to test a subscription model to address an important metric known as customer acquisition cost or “CAC.” He wanted to tap into a pool of people his age, did not have money to spend on expensive blades, and wasn’t as loyal to Gillette as most older men. This would be the foundation for Dollar Shave Club’s business model.

DSC began with a plan where they would ship high-quality razors to your residence for a dollar each month. The promise was simple: a cheap shave with a quality razor and the convivence of doorstep delivery. While the actual cost would vary between 3-9 dollars depending on the quality of the razor, it was still cheaper than Gillette’s $20 per month. But the true genius lies in the way they communicated their value proposition to set off a wildfire of word-of-mouth promotions.

Dubin decided to create an improv video with a tiny advertising budget to communicate a unique selling point: Price, quality, and Convenience. Dubin used humor as a way of connecting with his audience. With $4,500 (INR 3,37,500), the video titled “Our blades are f**king great” was launched. The YouTube video attracted an unanticipated amount of traffic, which crashed the company’s server in the first hour.

In its first 72 hours, over 12,000 people subscribed, implying a CAC of a mere 37.5 cents (Yes, I know. That’s virality done, right). The company stocked out, but as is customary with any direct-to-consumer company, DSC was prompt in their communication and begged customers to be patient.

Direct-to-consumer (D2C) : Core of business model of Dollar shave club

Essentially, Dollar Shave Club built a business model by eliminating the middleman, i.e., wholesalers and distributors, to sell to the customer directly. DSC was one of the first proponents of the D2C revolution. Their supply chain was straightforward. The company procured razors from a Korean manufacturer, Dorco, and would fulfill customer orders through partnerships with 3PL companies (Typical Ecommerce Playbook). 

The more critical component for DSC was to build a loyal subscriber base that could justify the low prices to ensure that the Lifetime Value (LTV) of any subscriber was significantly higher than the cost of acquiring the subscriber (CAC). As is evident from the video, Dubin and the team had a knack for humorous, on-point marketing videos that were organically shared repeatedly.

To dig deeper, let’s examine the customer retention cohort data screenshotted from  Second Measure , a service that uses anonymized credit card data transactions to reflect companies’ performances.

You’ll notice that the company could retain over a third of its consumers even after two years! That’s a flex that not many startups can boast of. An extremely loyal subscriber base was the moat in Dollar Shave Club’s business model.

They achieved this through an excellent customer experience. For example, customers could easily skip a month’s shipment without hassles if they did not need it. When was the last time you could cut service without 100s of customer service agents calling you? 

Dollar Shave Club offers three plans: “The Humble Twin” (two blades per razor, five razors per month, $4 per month), “The 4X” (four blades, four razors, $7) and “The Executive” (six blades, four razors, $10). Each subscription comes with a compatible handle.

Now dollar shave club is not just about razors. The brand sells all kinds of personal grooming products. Although the company primarily markets its products to men, approximately 20% of its customers are women .

View this post on Instagram A post shared by Dollar Shave Club (@dollarshaveclub)

The Best A Man Can Get? Think again

Gillette dominated the razor and blades market for over a century with its multiple patents and its obsessive attention to quality and detail. It had seen numerous competitors during this time, but any loss in market share was quickly recovered through the might of its R&D, manufacturing, and marketing.

It garnered over 70% market share (in 2010) that was unheard of in the consumer market, selling $4 Billion in razors and blades every year with rich profit margins of 50-60 percent. The consumer product giant, Proctor & Gamble, bought Gillette in 2005 for a whopping $57 Billion.

How then did Dollar Shave Club disrupt the market and chip away at this behemoth’s market share? 

The answer lies in Dollar Shave Club’s business model and its unique marketing strategy. Razor is a product that is frequently bought, used on a weekly or bi-weekly basis, and needs constant changing. This combination lends itself perfectly to a subscription model where the whole purchasing process is “automated” for a customer. Moreover, DSC made the online experience simple, fun, and personalized to each person’s needs. 

Their marketing playbook never changed: Humorous content conveying their unique selling point of convenient, cheaper shaves. The quality of their razors could never match Gillette’s, but it did not have to. The price reduction and increase in convenience meant consumers were willing to forego a higher quality product towards a “good enough” one. 

Is it the end of Gillette’s golden era?

Gillette failed to take DSC seriously until it was too late. Since the beginning, Gillette boasted of its higher-quality razors. Yet, they completely overlooked the consumer purchase journey. Online sellers like Dollar Shave Club dinged Gillette in the U.S. Market share was down significantly over the past decade from 70% in 2010 to below 50% in 2017, per Euromonitor .

We are very aware of what happening in the North American landscape and we are very focused on addressing some of the challenges that we face. We need to do a better job of telling guys we are available for them at a multitude of price points. Gillette spokeswoman Kara Buckley in 2017

As a tepid response to DSC’s success, they tried their club but could not circumvent their distribution network and potentially angered their partners. This was the chink in their armor since they could not match DSC’s convenience. Gillette’s market share kept hemorrhaging in the face of Dollar Shave Club’s business model, which would go on to command an 8% market share in the United States . 

Gillette failed to reduce its prices and resorted to desperate attempts to stop DSC. In Dec 2015, they sued DSC, alleging patent infringement as is typical of the moves used by entrenched giants. The suit was settled on undisclosed terms, but DSC continued to grow. At the time of DSC’s acquisition in 2016, Dubin made a $100 million payday for his stake while some of his early backers saw manifold returns. FYI: In January 2021, the founder Dubin has stepped down as CEO, now planning to disrupt something else.

More importantly, in the spring of 2017, Gillette had no choice but to reduce the prices of its razors by an average of 12% . Trying to win back its past glory, it took to a one-page ad on  New York Times  and  Wall Street Journal : “YOU SAID YOU WANTED TO BEST SHAVE AT LOWER PRICE. DONE.” 

What could’ve been an opportunity for Gillette by investing a few million dollars in Dollar Shave Club went on to become a multimillion-dollar disruption. It loses approx. $100 Million each year on account of its price reductions, on top of the hundreds of millions it lost to DSC’s market share gains. 

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Akash is a third-generation family business entrepreneur. He is currently working towards his own venture in the fashion e-commerce space and is a consultant for an Indian accelerator VC. He is keenly interested in new ideas and businesses, is a globetrotter, loves reading books, and plays golf during his free time.

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How Storytelling Turned Dollar Shave Club Into a Billion Dollar-Brand

Listen to this Article

In July 2016, Unilever shocked the business world. They were purchasing Dollar Shave Club—a startup dreamed up just five years earlier by an improv comedian named Michael Dubin— for $1 billion.

Reporters were baffled. Similar e-commerce subscription startups like Birchbox, Trunk Club, and Stitch Fix had failed to attract anywhere near the same interest. Plus, Dollar Shave Club sold blades that paled in comparison to the high-tech razors that brands Gillette and Schick were famous for. Heck, it didn’t even make its own razors! It just bought them wholesale from manufacturers in China and resold them. The billion-dollar price tag was also five times Dollar Shave Club’s expected 2016 revenue—a near-unprecedented multiple for a retail startup.

So why did Unilever pay such an unprecedented price tag? As forward-thinking analysts began to explain, it wasn’t about revenue. It was about the company’s relationships —with customers, and consumers at large. Relationships that began with possibly the greatest startup launch video of all time.

Dollar Shave Club’s Origin Story

In 1990, a group of comedians that included Amy Poehler, Adam McKay, Ian Roberts, and Horatio Sanz had created an improv group called The Upright Citizen’s Brigade (UCB). Before long, the UCB had its own Comedy Central TV show and served as a talent pipeline to Saturday Night Live . As class offerings expanded, it became the destination for the thousands of young creatives who stumbled out of their college acting classes and into the bright lights of New York City each year.

In the early 2000s, Dollar Shave Club founder Michael Dubin was one of those young creatives. For eight years, he honed his craft at UCB while working in various television and marketing jobs. In December 2010, he found himself at a Christmas party talking to one of his father’s friends. The conversation took an unexpected turn, and before long, the family friend was asking him for help selling 250,000 razors he had acquired from Asia. (We’ve all been there, right?) The conversation would have weirded a lot of people out, but it gave Dubin an idea. What if he started a service that would eliminate the expense and hassle of selling razor blades? What if they just showed up at your door each month for $1 each?

Faced with the challenge of getting the startup off the ground and attracting investors, Dubin knew that he had to speak to men like him. Men who were fed up with a razor monopoly that forced them to pay more than $20 for just a few blades. And so he bet big on what he does best. He created a hilarious video to connect with his target audience and cast himself as the protagonist in the Hero’s Journey of his own brand.

“Are our blades any good?” Dubin asks in the beginning of the video. “No, our blades are fucking great.”

What follows is 90 seconds of absolute absurdity that nonetheless touts all of the features of Dollar Shave Club’s razors. There’s a toddler shaving a man’s head, polio jokes, a machete, a clumsy bear, a giant American flag, and perhaps the best “make it rain” scene of all time.

The rough cut of the video convinced former Myspace CEO Michael Jones to sign on as Dubin’s partner. When the video was released on March 6, 2012, it went viral. The startup got more than 12,000 orders in the first 48 hours.

What Dollar Shave Club Got Right About Content Creation

Dollar Shave Club’s origin story highlights something powerful: The economics of marketing are changing quickly, with great content as the ultimate currency. As a result, brands that embrace great storytelling can achieve an incredible advantage over their competition.

The principles behind Dubin’s success aren’t new. Companies have always told stories to drive sales. From the very first barters made to the present day, that hasn’t changed. But everything else has. The sheer pace of technological change in how we are able to communicate our stories to each other—from the birth of radio a century ago to the hurricane of social media apps that mark the 2010s—can be daunting for brands.

On one hand, it presents a huge opportunity. Content is being published everywhere, and consumers are now immersed in stories everywhere they go. Per comScore, time spent with digital media tripled between 2010 and 2016. At last count, 65 percent of all time spent with digital media occurred on mobile devices, consumed primarily via social networks. As a result, companies that excel at storytelling can reach their target customers more effectively and at greater scale than traditional advertising ever offered—all at a fraction of the cost.

On the other hand, there’s more content now than ever. At a conference in 2010, Google CEO Eric Schmidt revealed that we create as much information every two days as we did in human history up until 2003, a figure that’s only increased since.

As a result, brands can’t create mediocre content and expect to stand out. Half-baked content simply has little chance of breaking through on social or search.

“There’s not a whole lot of value in writing a decent blog post anymore. [There’s not a lot of value] unless you can be pretty extraordinary,” SEO and content analyst Rand Fishkin, who also founded Moz, told us. “Ask: If they’re searching for an answer to a question, would they rather reach your piece of content than anything else on the internet right now? Unless the answer is a slam dunk, ‘Yes, this is 10 times better than anything else out there,’ I’m not necessarily sure it’s worth publishing.”

But when you do create something amazing that stands out? The results are staggering.

Especially when you keep doing it over time.

How Dollar Shave Club Scaled Its Storytelling

Dubin and Dollar Shave Club continued to crank out hilarious videos that their target audience watched millions of times and shared enthusiastically. One of the best follow-ups, “Let’s Talk about #2,” introduced their new butt wipes product and made more jokes about bears pooping than you ever thought you’d see in a brand video.

https://www.youtube.com/watch?v=3FOae1V1-Xg

It also started shipping The Bathroom Minutes , a small comic newspaper, with every order. And in late 2015, it launched MEL, one of the most ambitious editorial sites ever launched by a brand.

As Contently managing editor Jordan Teicher wrote in The Content Strategist : “MEL is a great example of how ambitious storytelling can stand out if brands stop trying to play it safe . It’s the only place you can read articles like ‘I Went Shark Fishing and Accidentally Caught a Kilo of Coke’ or watch short documentaries about subjects like former Harvard graduates who become medieval fighters.”

In total, these videos helped build an incredibly strong brand and lasting relationships with consumers. Moreover, they helped Dollar Shave Club achieve a financial exit that seemed impossible just a few years before.

As David Pakman, a partner at Venrock and an early investor in Dollar Shave Club, explained: “There are two things that drive multiples: the financial metrics and the story.”

As Dollar Shave Club proved, the right story can make those financial metrics look five times as good.

This post is part of a paid sponsorship between Contently and Convince & Convert.

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The Secret behind Dollar Shave Club’s Billion Dollar Success in One Graph

Nikhil Basu Trivedi

By now, you’ve probably heard of Dollar Shave Club .

From that video in 2012, to selling razors to millions of customers, to its acquisition by Unilever for $1B last year, founder/CEO Michael Dubin and the rest of the Dollar Shave Club team has executed incredibly well on many dimensions. They’ve made quality razors and blades much more affordable for consumers. They’ve built a brand that people love, that speaks authentically, and connects at an emotional level. The team has worked very hard to launch new products, improve margins, spend money effectively on advertising, and more. But there is one key element to the business that has made it so successful:

Subscription.

Dollar Shave Club built a direct-to-consumer subscription service for razors and other bathroom products. The company was projecting over $200M in revenue last year when it was acquired. And the retention in its subscriber base was the key reason for the company’s ability to make its unit economics work, and why it was such an attractive asset for an acquirer like Unilever.

What many people may have over-looked about the power of Dollar Shave Club is the power of subscription.

Take a look at the customer retention cohort data below screen-shotted from Second Measure , a service that uses anonymized credit card transaction data to gain visibility on the performance of public and private companies. The percent figures correspond to the % of customers that transact in any given month (denoted by the number at the top of the tables). For instance, the top left % number, 69%, indicates that in the median monthly group of customers, 69% come back and transact in the first month after they initially made a purchase.

You’ll see at the top under “Customer Retention Stats” that for the median and mean monthly cohorts of customers, a significant percentage of customers (over 1/3) remain as subscribers even 24 months out.

Below this, you see that for Dollar Shave Club’s customers acquired in monthly cohorts in 2014–15, about 50% remain as subscribers in month 12.

An important aspect of the Dollar Shave Club subscription service is the “Not So Hairy” plan, where customers can skip a month of receiving blades. You’ll see that month 2 customer retention (73–82%) is higher than retention in month 1, meaning that more subscribers transact in their second month than in their first month, a manifestation of a significant portion of members skipping their first month delivery of blades and just receiving them in the second month.

Here’s a graph from Second Measure showing Dollar Shave Club’s customer retention by monthly cohort in a 4-year period (a way to visualize the above tabular cohort data):

Dollar Shave Club sees 23.40% of customers retained in month 48 — that’s almost 1/4 of its subscribers who are still subscribing to the service 4 years later! Note on the graph the upward bumps in retention every other month due to the “Not So Hairy” customers who subscribe to Dollar Shave Club bimonthly instead of every month. Again, this data is from Second Measure, and not from the company, so the absolute numbers should be taken with a grain of salt.

Every great subscription business has a retention graph that asymptotes out significantly above zero, the higher the better of course. And the higher the retention, the higher the customer lifetime value, and the higher a business can justify spending to acquire a customer to grow revenue.

The company did not just get lucky.

The fact that Dollar Shave Club has high long-term retention of its subscription members is not down to luck.

People buy razors, need to change the blades frequently, and most people shave on a very regular basis… this is a product category that lends itself perfectly to subscription on a long-term basis.

The experience of buying razors in stores can be cumbersome — have you ever had to call a store representative to open up the razor cabinet? — and Dollar Shave Club made the online experience of subscribing to razors both simple and fun.

The company has also paid close attention to why subscribers churn, and has worked hard to address these issues and improve the likelihood that members will continue to subscribe.

Above all else, Dollar Shave Club has created an amazing consumer experience , and that has manifested itself in a subscription service that retains its users at high levels.

More to come on The Power of Subscription…

At Shasta Ventures , we were privileged to be investors in Dollar Shave Club’s first round of financing, led by our partner Sean Flynn. And we continue to be big believers in subscription businesses. Our partner Jason Pressman wrote a great piece in Forbes a few weeks ago about “The Not-So-New Promise Of The Subscription Economy” . We’ve invested early in companies like Zuora , a subscription management software platform that is used by leading subscription businesses and has its annual Subscribed conference next week. We’ve also invested in digital subscription services like Smule , Hinge , Zwift , and Canva , and in physical product subscription services in addition to DSC like The Farmer’s Dog , Perfect Coffee , and Imperfect Produce .

We’re also investors in Second Measure, and will be showcasing more of its data in future blog posts about subscription businesses. We’ll compare what retention looks like between different subscription services (ever wondered what Netflix’s retention looks like versus Spotify’s?). And we’ll look at businesses that are doing great, as well as ones that are not-so-hot or have failed. Please follow us to get notified when the next post is published — you won’t want to miss it!

If there are particular companies you are interested in learning more about, or if you have any thoughts on subscription businesses, please post a response!

Written by Nikhil Basu Trivedi

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Dollar Shave Club Business Model | Case Study

Dollar Shave Club, launched in 2011 as a subscription-based online razor retailer , has one of the most common yet great business model we’ve encountered until now. Dollar Shave Club Business model is a subscription-based business model but with a twist. The company has positioned itself as a men’s lifestyle club that provides grooming products at a cheaper price and also helps men live smarter and more successful lives.

There are many points to nod at when we talk about this very famous and successful business model of dollar shave club . The company positioned itself as a club, focused on the actual problems which men faced while purchasing a razor, and solved that problem effectively and efficiently. This is all a good company needs to focus on to stay in the market for long.

The company was founded by Mark Levine and Michael Dubin with an initial investment from Science Inc.   Dollar shave club’s business model was so strong that the founders were able to raise $9.8 million in the series A funding. The company never looked back since then. It now deals in dozen of other men’s products as well.

Dollar Shave Club Business Model

Dollar shave club business model isn’t as complicated as it seems to be. There are a few aspects that you should note-

• Dollar Shave Club works on a trading model. It procures goods in bulk from other companies (eg. razor from Dorco USA) and sells them at a profit.
• The company acts as a club whose members are subscribers to their products.
• DSC believes in investing in customers. Hence it doesn’t charge profit (and even incur losses ) to convince the customer to be a part of the club. A customer becomes a member of the club when he buys the first product from the company. Hence the strategy of  ‘just $1 for any product’ which lets the customer pick any product for just $1 when they buy from the club for the first time.

What convinced founders to start this company?

In a market dominated by leaders like Gillette and Schick, where customers only had the option to either empty their pockets to buy a good razor with better technology or to choose an inferior, painful shaving technology, the business model proposed by DSC which sold economical good quality razors was sustainable. The founders were usual frustrated customers of these big brands. They wanted something better so they started it.

How does Dollar Shave Club make money?

Dollar shave club business model is a trading + subscription model.

The company doesn’t produce whatever it sells in the market. The products are procured in bulk from other companies and sold to the members of the club. It’s a simple model of making a profit by selling the products at a higher price than it was bought for. The subscribers become the members of the club which are delivered products every month.

Cost of goods sold includes – 

• Product Cost
• Shipping Cost (shipping + envelope + printing cost)
• Selling, General & Administrative costs  (includes marketing, administrative, and other miscellaneous cost and expenses)

The company bears the product and shipping cost for the first product sold to a customer. Shipping cost and product cost (+ profit) are charged to the bill if the customer continues the subscription.

This one-time investment in the customers provides the company with some long lasting loyal customers.

How is DSC different from other companies?

Dollar shave club has positioned itself as a club and not as a usual company. It has addressed the actual problems of men which they incur while purchasing grooming products. Though they are actually doing everything the same as it is done by a usual company; their marketing strategy is different.

Marketing Strategies adopted by Dollar Shaving Club

Dollar Shave Club has some great marketing brains. The hit the right nerve, of the right target audience, with right products.

The company, positioned as a men’s lifestyle club , communicated about their products being F**king great and economical and offered a subscription-based plan which initiated automatic repeated sales. The customers can buy any product for the first time at a minimal cost of $1 which makes them a member of the club.

The company relied on content video marketing in the start where the CEO himself, through his charismatic personality and a great throw, entertains the viewers and promises them about the economical price and great quality of their razors.

In its first 48 hours, around 12,000 people signed up for the service which was sufficient proof of video being a success.

One of the points to note about the video is that, unlike other usual Razors advertisement, this advertisement talks to viewers in a relatable voice and make them connect to it.

DSC has been successful in mapping the consumer behaviour . Along with the products, it also focuses on developing a direct relationship with the customers they were dealing with. The focus is more on the brand experience which can be seen in their every marketing move.

The company knows its audience and curates the messages specifically to keep them engaged. With each delivery, customers get a “Bathroom Minutes” magazine which resembles the funny pages of a newspaper, life and grooming tips, as well as articles answering some quirky questions.

Some customers want to be a member of the club just because of its distinctive and witty personality .

Dollar Shave Club has cleverly blended an economical and convenient product along with an entertaining and relatable positioning which helped them poach customers from the market leaders like Gillette and Schick. Gillette even started its own shave club  to counter this competition.

Acquisition by Unilever

Dollar Shave Club was acquired by Unilever in a deal to be worth about $1 billion. This amount was worth five times the projected 2016 revenue of the company. But Unilever is now a tough competition to the existing players of the men’s grooming products market.

Go On, Tell Us What You Think!

Did we miss something?  Come on! Tell us what you think about our article on Dollar Shave Club Business Model  in the comments section.

A startup consultant, digital marketer, traveller, and philomath. Aashish has worked with over 20 startups and successfully helped them ideate, raise money, and succeed. When not working, he can be found hiking, camping, and stargazing.

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Dollar Shave Club – An Inspiring Action Case Study

This was written after Dollar Shave Club launched and at least a year before they sold for a cool billion dollars to Unilever. We said that Inspiring Action brands build value faster, that they drive up brand value while driving down cost-per-acquisition. We pointed to Dollar Shave Club as a prime example. Now Unilever gives us the data point for the end of our case – and a nice round number it is! Here’s what we wrote back then:

1) DEFINE the alternative future you exist to prevent.

In a world without Dollar Shave Club, giants of shaving Gillette and Schick might continue the trend of ever more expensive shaving, driving more and more men to cheap, inferior, painful shaving technology. In a world without Dollar Shave Club, smart young men with potential won’t have the grooming to match.

2) DISCOVER what the people you serve aspire to be and do.

Dollar Shave Club views itself as a men’s lifestyle company that helps men live smarter and more successful lives. Note that not being able to afford to shave with Gillette’s multi-bladed razors and having to go with the supermarket basic instead doesn’t make men feel successful; it makes them feel poor.

3) LEARN what your devotees love about themselves with you.

Members of the Dollar Shave Club feel they are part of something new, different and smart. They are part of a club with a distinct and witty personality. Dollar Shave Club claims a culture that is “original, creative, and cool.” Creative and cool may be two of the most overused words in marketing, but Dollar Shave Club has more than proved them through their marketing.

4) DEVELOP an “inspiring idea” above commercial intent.

Dollar Shave Club is clearly a for-profit business and the CEO even asks you for your business through his powerful viral videos that have now become effective TV commercials as well. However, making money isn’t the “inspiring idea” behind Dollar Shave Club. Solving the problem of getting a reliably good shave without paying a fortune for razors and blades is the “inspiring idea” of Dollar Shave Club.

6) UNDERSTAND what actions drive the creation of organizational value.

Crucial to Dollar Shave Club’s success has been its inventive strategy for building business value. No doubt thousands of companies have had the idea of producing quality men’s grooming products, including razors, and selling them along-side Gillette and Schick in retail stores. Dollar Shave Club has succeeded in part because they realized there was more value to be created in developing direct relationships with the men they would serve. Because Dollar Shave Club fully appreciated the value of these direct relationships, they kept the cost of entry-level membership very low. Their basic package, including razor and blades is still just one dollar per month! Clearly, they realized that their business value isn’t driven by the money they make on each new membership. They understand that the lifetime value of a member can be worth much, much more. They also knew that the “automatic revenue” of a subscription model would increase their business value and thus their ability to raise money for marketing and other purposes.

7) Map the pattern of behavior that you wish to change.

Mapping the customer journey of the young man on the way up, Dollar Shave Club discovered its prospects spending a great deal of time in social networks, playing games and consuming videos online. The journey also led them away from these digital channels into retail stores where they experienced difficult and unsatisfying choices.

8) HELP people interrupt and redirect behavior in inspiring ways.

Dollar Shave Club realized they could interrupt and redirect that journey in a pleasing and profitable way by meeting their prospect online, first through brand direct videos that were so entertaining they gained a viral following.

Dollar Shave Club’s subscription model adds more business value because it taps into persistent behavioral biases. People will pay more – a lot more – if they do so on an automatic and regular basis, as invisibly as possible. To understand just how powerful this bias can be, consider the U.S. Income Tax. Before the tax was made a payroll deduction – in other words removed from paychecks ahead of time – people had to pay a portion of their income to the government at the end of each year. The fact is that very few people actually did it, and the people who did paid only a portion of the tax due. Collecting the tax was an expensive failure, and raising taxes was political suicide.

Many experiments have shown that people value a dollar they already have much more highly than a dollar they stand to earn. Therefore, it’s much harder for us to pay out money we already have than it is to give up money we haven’t yet received.

When the government changed the income tax system and started collecting from employers who deducted taxes from pay before it was distributed in paychecks to employees, not only was much more tax collected, but the political support for higher taxes increased dramatically. People just didn’t care as much about money they never got to hold. At its peak, the highest federal tax bracket was 90%!

Similarly, when American Express prints “Member Since” on our cards, we wear it as a badge of pride rather than a giant price tag.

Understanding behavioral economics and using behavior design to build business models that make it easier for people to pay you more and longer can dramatically increase the lifetime value of a customer.

That’s how Dollar Shave Club is building an Inspiring Action brand!

We’ve identified ten signs of inspiring action companies, which you can find here .  Each case study typically focuses on a few of the signs, so please do read more than one!

Dollar Shave case study: The underdog success that no one saw coming

Written by Graham Robertson, founder of Beloved Brands

[email protected], cal 416 885 3911, follow me on linkedin, beloved brands book.

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