Brands Beware

There’s a new twist to the old marketing adage, “Give away the razor and sell the blades.” Renegade Web site FreeRazor.com is riding the coattails of Gillette Co.’s Mach3 and Venus razors, offering “free samples” of the popular razors in exchange for registrants’ credit card number. The site says it uses credit card numbers to verify that it’s only sending one sample per consumer, but FreeRazor.com charges cards for the replacement blades it ships every other month.

Coming soon to a PC near you: FreeSwiffer.com and FreeTampax.com (both Procter & Gamble brands) due to launch this month, with FreeReadyMop.com (Clorox Co.), FreeMop.com and FreeDetergent.com reportedly in the works. All are independent and unblessed by the brands they tout. To top it off, the sites’ founders plan to hit brands up for market development funds and other trade support.

Popular packaged goods brands face a growing threat of being hijacked online. For the last three years or so, spammers have overlaid brands’ legitimate online offers, collecting e-mail addresses before linking consumers to the brand’s own page, then selling addresses for spamming. Now come sites that tout a single brand, offering a sample followed by automatic product shipments. It’s legal, but brand marketers don’t like it.

“This wrests control of brand equity from the manufacturers’ hands, and that’s not a good thing, ever,” says Ken Harris, partner with consultancy Cannondale Associates, Wilton, CT. “A site like [FreeRazor.com] is a parasite living off a very large host. They aren’t adding value to the brand, and are detracting from the pricing structure.”

Gillette hasn’t taken legal action against FreeRazor.com, which launched in late 2002, but did ask that FreeRazor.com specify that it is not affiliated with Boston-based Gillette. The site’s disclaimer may be clear, but it’s not universally effective: Gillette still fields calls from irritated consumers who want to cancel FreeRazor.com shipments or get off its e-mail list. Most complain about how hard it is to cancel FreeRazor.com’s service. “FreeRazor.com is not affiliated with Gillette in any way,” says Gillette spokeswoman Michele Szynal. “We direct consumers to their state attorney general and the Better Business Bureau. That’s all we can do.”

FreeRazor.com parent Convenient Commerce Corp. contends the confusion is minor: “People are not really confused; it just seems like they are,” says Daniel Khesin, VP-operations of the Berkeley, CA-based firm. “We reach millions of people every day, but only 50 or so call Gillette each day. Any large company will have people who are upset or don’t understand something.”

Khesin also stresses that FreeRazor.com’s replacement-blade service is very clear in the site’s FAQ and registration process. “Everyone looks at the FAQ because people understand that if they’re getting something for free, there’s probably a catch,” says Khesin, who won’t disclose how many FreeRazor.com registrants cancel shipments of blades. The only complaints FreeRazor.com fields are about late shipments, he adds. (Delivery usually takes four weeks but sometimes as long as eight.)

FreeRazor.com e-mails millions of consumers and upsells at other commerce sites, where shoppers get their free razor as a “thank you” — then get billed for replacement blades until they cancel. The site claims 200,000-plus registered users, and expects to reach 500,000 by summer, with expansion to Canada early this year, and Europe by yearend.

That demand will strain FreeRazor.com’s wholesale suppliers. FreeRazor.com gets Gillette products through “four or five reliable channels,” including liquidated inventory, says FreeRazor.com CEO Steven Vachani. “People are willing to pull strings when you’re offering $2 million to pre-buy a product. Some companies specialize in that,” he says.

Still, it’s unlikely that inventory of top-sellers Mach3 and Venus is ever liquidated. Convenient Commerce wants to buy directly from Gillette to meet demand. FreeRazor.com founders spent six months talking with “very senior marketing executives in five different departments” at Gillette before launching, says Vachani. Gillette initially was “intrigued,” but became “more conservative” when the site launched, and was put off that some consumers thought the offer was from Gillette, he says. “We seek more cooperation from Gillette,” Khesin adds. “It’s really important for us to build this relationship to enhance the clarity of the offer.”

Vachani “never talked to anyone with any authority,” says Szynal. He may have asked for a price break, but “we don’t give deals, not even to Wal-Mart. Everyone pays the same price.”

Collaboration?

Convenient Commerce plans to approach P&G about FreeSwiffer.com and FreeTampax.com after running the sites for about six months “so we can give them a market plan based on real numbers,” Khesin explains. “We’ll work with local distributors to get product in the meantime.”

Adds Vachani: “We need a stronger case to show how [the business model] works.” He hopes to tap trade marketing dollars, getting a cut of market development funds and sampling budgets like traditional retailers.

P&G can’t comment on pending sites “until we know more about what the plan is, and we haven’t been contacted so far,” says spokeswoman Elaine Plummer. P&G’s own site, BeingGirl.com, gives Tampax and Always samples (fulfilled by StartSampling.com, Carol Stream, IL) and Tampax sells at drugstore.com. Separately, Swiffer has been sampled on-line through HomeMade Simple.com, and P&G used direct-mail sampling to launch the mop brand. (Gillette does no online sampling. Its only regular sampling is the 11-year-old Eighteenth Birthday effort that sends young men a razor on their milestone birthday.)

“We expect building a relationship with P&G will be much easier than … with Gillette because P&G has more discount programs,” says Khesin. “Gillette is not really ready for e-commerce. They’re a very traditional business and have done well in traditional retail for decades.”

“Yes, we’ve done very well: We’re the market leader in every category we take part in, using traditional forms of marketing and selling,” says Szynal.

It’s unusual — and confusing for consumers — for an unaffiliated site to rep only one brand. Most sampling sites, such as StartSampling.com, contract with packaged goods companies to fulfill consumer requests. CPGs obviously also sell items via e-tailers: Mach3 and Venus are available through CVS.com, Walgreens.com, and drugstore.com. Gillette’s own commerce site, theEssentials.com, accounts for a tiny fraction of its $909 million in razor and blade sales (per Information Resources Inc.). The stay-in-stock service is a convenience for the small number of consumers who want that, but most shoppers quickly realize they can get as good or better a deal locally at retail, given retailers’ flexibility to make their own price cuts.

Focusing on a single brand isn’t illegal. Vachani says Convenient Commerce runs single-brand sites to provide the best product and build economies of scale for its low-margin business. Khesin says a single brand works because “it’s a straightforward offer.”

Except for brands themselves.

If your brand gets ambushed …

It’s not illegal for someone to sell your brand, but if you feel hijacked, you may have legal recourse. Here’s what to look for, says Ken Florin, attorney with Loeb & Loeb, New York City.

• Are they using your trademark improperly? Use of your photos, brand name, and marketing elements may constitute trademark infringement.
• Are consumers confused? If shoppers think your brand is making the offer, that may constitute trademark dilution. Let consumers know you are not affiliated with the offer, and direct their complaints to regulators (state attorneys general and/or the Federal Trade Commission).
• Keep track of consumer complaints; their confusion can be proof of trademark dilution. “The best cases have evidence where people thought an offer or product was provided by a different company,” says Florin.