Norelco Consumer Products Co. Business Information, Profile, and History

History of Norelco Consumer Products Co.

Norelco Consumer Products Co. is a division of Philips Electronics North America Corporation, a subsidiary of Philips Electronics N.V. of the Netherlands. Norelco is a leading manufacturer of men's personal grooming products, including electric razors, beard and moustache trimmers, and hair clippers. Over the past 50 years, Norelco has achieved many key milestones and continues to lead all electric razor manufacturers. Norelco is dedicated to developing grooming solutions for men through research, leading-edge technology, and innovation.

A Late Start in the Shaver Industry

Norelco sold the first single-headed rotary electric razor in the United States in the late 1940s when Gillette, the originator of disposable blade razors, dominated the shaving industry. Its chief rivals within the electric segment at that time were Remington, Schick, and Sunbeam. Norelco's parent company, Philips Electronics North America, had first established American operations in 1933 and introduced its first razor, the Philips Philishave, in 1939.

The shaver market, whether electric or blade, had always been consumer-driven, with purchasers making selections based largely on brand recognition and loyalty. Thus, as a relatively late entry in the shaver market, Norelco focused its competitive energies on advertising. Since most electric razor sales occurred in the year's fourth quarter, at holiday gift-giving time, Norelco put large amounts into its fourth quarter ad campaign in an attempt to decisively influence gift purchases.

The 1950s were good years for electric razor manufacturers as a whole. Electric razor sales peaked in 1956 at about $140 million, and sales for Norelco increased in keeping with the upward trend. A leader in electric razor innovation, Norelco introduced its Speedshaver, a double-headed rotary razor that featured a pop-up trimmer for sideburns and moustaches and "microgroove" shaving heads in the 1950s. Yet by 1961, the industry had shrunk to less than $100 million, a decline blamed primarily on Gillette, which aggressively marketed its disposable razors and stole potential business away from the electrics.

Advertising Success in the 1960s

Norelco entered the 1960s with 18 percent of the diminished electric market, ranking fourth in its category, behind Remington and Schick, each with 30 percent, and Sunbeam with 20. During this decade, Norelco began to increase its advertising budget and to build its campaign around sports programming. Dedicating more than 50 percent of its $3 million in advertising to broadcast television, Norelco focused on the NFL games, with promotions accompanying the ads: free footballs, a book about professional football, sweepstakes for trips to the playoffs, and the Super Bowl games. From football, Norelco branched out to other sports events, becoming a year-round advertiser, while still continuing its emphasis on fourth quarter advertising. In 1961, it launched its well-known, long-running holiday campaign, which featured Santa riding a razor across a snowy landscape and calling the brand "Noelco."

Shortly after the Santa campaign took off, Richard Kress, the man who would lead Norelco to dominate the electric razor market and who would head the company for nearly three decades, came aboard as head of advertising for the company in 1963. The enigmatic and energetic Kress, who became president in 1971, held an MBA in business administration from Wharton and had a background in advertising, yet claimed to be a bad speaker. To overcome his "handicap," he staged stunts to motivate his sales force, such as rappelling down buildings, flying across streets as "Norelco Man," and once went a few rounds with a professional boxer at a yearly sales convention. The quixotic executive doubled the ad budget to $6.2 million, adding sponsorship of horse racing's Triple Crown and such popular television shows as "Smothers Brothers," "Mission: Impossible," "My Three Sons," "The Carol Burnett Show," "Lost in Space," "Gunsmoke," "Gilligan's Island," "Candid Camera," and "The Ed Sullivan Show." Kress's new marketing methods, accompanied by improved shaver technology and greater acceptance of electric razors by women, spurred a mid-1960s upswing in sales of electric shavers. Seven million razors were sold in 1965, of which Norelco seized the lion's share.

The Leader in a Declining Market in the 1970s

After the FTC ruled that advertisers could name the competition in the 1970s, the long-term rivalry among the shaver industry's top competitors became public. Schick ran an ad in 1973 claiming that lab tests proved that its Flexamatic shaved closer than Norelco's VIP Tripleheader. The ad was part of a campaign geared at increasing Schick's 8.3 percent share of the then $175 million electric market to 20 percent by year-end. Norelco, number one with a little less than 50 percent of the market, responded by challenging the test's methodology and filed a lawsuit, along with Remington, then number three with about 33 percent. Identifying the competition did nothing, however, to help Schick; the National Advertising Review Board ruled in 1974 that the Schick ads were "false in some details" and "misleading in overall implications." Schick's market share dropped by 1975, while Norelco's fate improved. Despite a general decline in electric razor sales from early 1970s highs of 5.5 million to 4.5 million by 1975, Norelco increased its share of the smaller pool. This overall decline was attributed to a number of factors, including the economy; the popularity of competitive gadgets, such as the pocket calculator; the huge ad budgets backing wet shave systems; and public confusion following the shaving closeness wars.

Secure with its growing lead in the electric market, Norelco turned to take on Gillette in the wet shave market with its "We beat the blades" campaign. It backed its challenge by advertising: "We dare any blade to match shaves with a Norelco," and an ad budget that, by the end of the 1970s, had risen to $10 million. A visually direct attack on wet shaving systems, the 1974 "Gotcha!" campaign, showed a man getting nicked by a blade razor, and may have contributed as much as a ten percent increase to Norelco's growing command of the market--from 48 percent in 1974 to 58 percent in 1975. Tests conducted by an independent research organization, billed as the "most intensive consumer and laboratory testing ever developed for the product category," also helped to support Norelco's claim that its electric razors gave a shave as close as blades. The competitive tactic succeeded where Gillette's had failed and helped make Norelco the first choice among electric shaver buyers.

By the close of the 1970s, an estimated 30 to 35 percent of the American shaving population used electric razors and Kress announced in Advertising Age that the electric razor market had shaken off its bitter internecine ad rivalry and was "beginning to grow again." By 1978, Norelco was selling more than three million men's shavers and 450,000 women's razors annually, capturing an estimated 60 percent of the market segment. In that year, Norelco chose to invest more than $20 million to campaign for a host of new products headed by its premium-priced line of Silver Rotary Razors, which it pitted against Gillette's new wet-shave razor. It purchased longtime rival Schick, began to market men's and women's bladed razors under the Schick brand name, and extended its "Gotcha!" campaign to its new Solid State Charge Rotary Razor, the first to convert automatically to any electrical current in the world.

Product Innovation, Diversification and Reorganization in the Early 1980s

Norelco pursued product innovation and diversification in the early to mid-1980s. Seeking to capitalize upon the aging of the American population and its increased health consciousness, it introduced many new items in the area of healthcare, such as blood pressure testing machines, electronic digital scales, and a vibrating board to provide back relief. As early as the 1970s, Norelco had introduced its coffeemaker, a direct competitor for the Mr. Coffee machines, to whom it ran second in market share. Now it added other kitchen appliances, such as toaster ovens and food processors, and irons, its biggest success.

In the area of personal care, Norelco introduced its Rotatract Lift and Cut Rotary Razor in 1980, advertised as "Twin blade closeness with no 'Gotcha."' This put Norelco in direct competition with the wet shave industry. It later brought out its Chic and Satin lines for women: a curling brush, compact hair dryer, and a brush/massage head for the shower, and further segmented its market with the introduction of the "Black Pro" shaver designed to lift curly whiskers and meet the needs of black men via a custom-engineered "razor bump." It also added its Man Care collection of hair dryers and shoe polishing kits, leveraging off its share of the electric market.

Much of this innovation was spurred by the increasingly competitive nature of the market in the mid-1980s once Remington, Ronson, and Braun began to sell both shavers and kitchen appliances in the United States. Norelco's market share in razors dropped to 56 percent by 1985 in the United States, and in Canada, where competition came from Braun as well as Remington, its market share dropped from 60 percent in 1980 to 45 percent in 1986. Braun's pressure came at the high end of the market, while the others came especially in the low- and mid-priced segments. Norelco responded by upgrading its product line, as well as by adding low-priced shavers in 1985, backing up its razors with a 25 percent increase in consumer advertising, 60 percent of which was allocated to TV and 40 percent to print ads. However it found the introduction of less expensive products hurt sales and profits since its bestselling razor was not its traditional $55 shaver but its new $19 model. It thus quickly dropped its lower-end razors in favor of higher-priced, higher-styled units, shifting its emphasis from price to product.

When Richard Kress suddenly resigned as president of consumer products in 1986, profits were down in both the electric razor and coffee machine markets for Norelco, where Braun had also pushed the upper end. That year saw major restructuring at Norelco, which had gone from $100 million in sales in 1968 to $250 million during Kress's tenure. U.S. Appliances, which marketed Schick razors and had been under the aegis of the Norelco Consumer Products Division, was transferred to the Philips Home Products division, which had been created in 1986 to launch a full-line of Dutch-made appliances. Kress continued as corporate advisor to North American Philips, while John Beggs became president in 1987, followed in 1991 by Patrick Dinley.

The original rationale for creating the Philips Home Products Division had been to provide a distinctive identity for the company's higher-end products. However, in 1988, in order to take advantage of economies of scale and savings in distribution, U.S. Appliances was transferred back to Norelco, which resumed marketing and administrative responsibilities for Schick electric shavers and Philips small appliances. This change was accompanied by a series of others at Norelco. From 1987 to 1989, it increased its ad budget threefold from 10 to 30 million and, at the same time, cut in half the number of products it offered, exiting all of its markets except men's and ladies's shavers, coffeemakers, steam irons, and clean-air machines.

Continued Diversification and Innovation

By the early 1990s, advertising levels had risen across the shaver industry to meet the growing high-end market. Norelco reintroduced its old Santa spots in 1992, updated with the latest computer animation, and, in 1997, it added sponsorship of the NHL Stanley Cup Playoffs, with accompanying advertising in print. By the mid-1990s, Norelco, with an ad budget of $30 million, was spending more than the rest of its competitors combined. The men's market had reached $357 million wholesale ($160 million retail) by the late 1990s, while the women's market was a $63 million wholesale category.

Norelco's new generation of razors continued to reflect the trend toward upgraded products. Its three distinct Tripleheaded shaving systems: the company's Reflex Action, Micro Action, and Double Action, all had Norelco's Lift & Cut technology and many had pop-out trimmers for beards, moustaches, and sideburns; some were battery powered, others rechargeable. In 1996, it expanded its Silhouette series of women's shavers, upgrading the line with additional features such as ergonomic design, a bikini trimmer, and rechargeable and/or battery options. In 1995, Norelco added its Maverick line of beard trimmers.

Norelco continued to diversify into other product lines as well in the 1990s. In 1993 it debuted its Satinelle Hair Removal System for women, promoted via infomercial. In 1995 it introduced a line of dental care products and its Voyager line of travel items, including irons, garment steamers, a styling brush, a travel razor, alarm clocks, and a hot beverage maker. It also expanded its line of kitchen electrics, made by Philips N.V., marketing an assortment of high-end and volume-oriented products. In 1995, Philips purchased bankrupt Regina vacuums for $17 million to provide its products entry into the U.S. floor care market and assigned responsibility for distribution, sales, and marketing of Regina products to Norelco. In 1997, Norelco launched sound conditioning machines, Norelco Natural Sounds, and electric aromatherapy diffusers, called Norelco Natural Aromas, along with Naptime Sounds for its Baby Sound Selector.

Norelco's ventures in the realm of beauty and wellness products reflected its desire to appeal more to a female audience. These personal care products were marketed under the Philips brand name. Yet at the same time, Norelco was rolling out new packaging for its mainstay--men's grooming products--which continued to be sold under a newly designed Norelco label. Norelco was once again reinventing its marketing strategy, positioning itself to gain access to a larger portion of its markets, while relying, as always, upon brand recognition and heavy advertising to sway consumers its way.