I had never heard of DollarShaveClub.com before an Atlantic contributor sent me the 94-second advertisement below. But I'm pretty sure that it's funnier, more creative, and more all-around awesome than any single spot in the Super Bowl. Watch it. Utterly humorless economic analysis follows the video.
Here's the business pitch: Buy our razor because it's really cheap. If you spend hundreds of dollars a year on brand-name razors, you're not paying for the razor. You're paying for what the razor represents.
And here's the thing: The dude is right! Making razors is really cheap. Even quadruple-bladed, triple-aloe-stripped monstrosities don't cost Gillette anything close to the retail price. So when you buy one of these fancy razors, most of your money isn't going to production costs or shipping costs. It's going to marketing costs. It really is going to Roger Federer and an ad agency and a communications team and all trappings of marketing that exist to distinguish the Gillette brand.
Across the economy, even as the price of items like razors, toasters, clothes, and food have fallen compared to wages, the share of their price that goes to marketing has increased. The stuff that's getting cheap is actually getting even cheaper than we think it is, because we're paying for the costs of distinguishing similar products.
But along comes a company that says: Let's limit our ad costs to a bear suit, an American flag, and props for this guy who looks like Tony Goldwyn. Let's market ourselves with virality instead of celebrity. Then let's pass along the savings to customers.
There is no tremendous innovation is saying "let's sell good razors closer to cost than the competition." But there is innovation in managing a supply chain to get the price you want and creating a clever razor-subscription business model to sell them. And there is even more ingenuity in using free media to make a cheap hilarious video that actually distinguishes your product from a saturated market of razors. I don't know who's going to buy this thing (I myself use an electric shaver) but replacing celebrity marketing with guerrilla marketing is a really clever way to reduce overhead and wind up with a cheaper product.
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