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By Dick Maggiore and Mark Vandegrift

Designing a New Category

Positioning for Success: The Value of Designing a New Category

Want to dominate a business category? There’s only one sure way to do it: create a NEW category. As we learned from Jack Trout’s, Marketing Warfare, “if you’re not #1 or #2, be something new!” As positionists, we’re always encouraging our clients to stand apart. Building a category is one of the best ways to position because it means being perceived SEPARATELY or APART from your competition. It means standing alone rather than in a sea of also-rans.

Creating a new category means creating either a new market segment (carving out a more niched audience) or a new product category (innovating your product enough that it can be described in a generic way to an existing audience). Think minivan to the car category, or sensitive teeth to the toothpaste category. The goal is to convey a simple and easy to understand value proposition using a generic description to name the category.

A new category name cannot be complex. It must clearly convey the benefit to the customer. For instance, when Poppi launched its new soda, the market described it as a “functional beverage.” Functional defined the prebiotic nature of the drink, but potential customers didn’t understand the idea of a functional beverage. Boring. Emotionless. Plus, “beverage” was too broad. Beverage can mean anything from water to liquor.

Instead, “healthy soda” was the better category descriptor. Soda is a specific type of beverage, and healthy described the customer benefit. It’s easy to believe because sodas are not known to be healthy. So, in creating a new category, it’s imperative to convey a feature or benefit that is obvious to the prospect. Oftentimes, companies will use their processes or ingredients to name the category, and typically, that’s only beneficial to those on the inside of the company. If customers can’t immediately understand the value of purchasing the new category, the idea will flop.

Before you get too excited and start creating categories, understand that category creation is laborious and expensive. It requires companies to play the long game because public relations is usually the primary marketing discipline employed, and it takes a while for the public to first become aware of, and then trial, the new category. (Or, if you’re like Poppi and are well funded, then drop a Super Bowl commercial or two and skip right past the PR. If you’re on the Super Bowl, the PR will naturally follow!)

The benefits are huge, however, as the company who creates the category typically owns 90%+ market share. For every dollar the category grows, the company increases revenue 90¢ or more.

Before we get into a few lightly described tips in building a new category, consider taking a longer read and pick up the book, Play Bigger: How Pirates, Dreamers, and Innovators Create and Dominate Markets. The description of their book states it succinctly: “Winning today isn’t about beating the competition at the old game. It’s about inventing a whole new game — defining a new market category, developing it, and dominating it over time. You can’t build a legendary company without building a legendary category. If you think that having the best product is all it takes to win, you’re going to lose.”

If you’re convinced this approach is right for your new company, product, or service, then consider these steps on how to correctly DESIGN a new category.

Connect to an Existing Idea or Category

Before cars were called automobiles, they were known as horseless carriages. And the typewriter was called the personal printing press. Humans adopt new ideas quicker when they have an existing idea in their minds, and the additive element is easy to comprehend. The idea is to lead them without straying too far from their safety zone. Uber was a hit because it connected to a taxi, and the new idea was that we could summon it on-demand with an app. For those a bit more seasoned, you’ll remember that 7UP was easy to trial because it was still a cola, but without the thick, dark-colored syrup. The uncola. And perhaps Poppi will be similarly easy to trial because it’s still a soda, and it’s not hard, in fact it’s desired, to have a healthy soda option.

Keep It Simply Straightforward

OK, this isn’t the true expression of the KISS principle, but it works for the purposes of designing a new category. As mentioned above, the category should be defined as a clear benefit to the prospect, either directly or indirectly. Uncola doesn’t naturally describe a benefit, but the feature is obvious enough and was defined as lacking in the typical dark syrup typical of colas. Functional beverage makes a difficult connection to prebiotics, whereas healthy beverage may not create a connection to prebiotics, but the prospect is left with the idea that whatever is in the drink, it’s healthy. And that’s sufficient.

Lead with the Category, not the Brand

The tendency – because we as marketers love to market products and services – is to create the category and simply use it as a descriptor on your logo. That will KILL the new category. When building a category, the category is what leads in the advertising. In fact, many of the communications may not mention the brand at all. This should be carefully thought through, because if you make it obvious, you’re trying to “sneak” your way into the market, customers will sniff that out fast.

When we built the category of insulated siding for a client, the goal was to gain interest in the category because of the obvious benefit of putting insulated foam behind hollow siding. We promoted the idea of a higher R-value and adding rigidity to a flimsy cladding. As consumers learned of the category, they started to demand the category and then sought the available products. Of course, there was only one dominant player in the space: our client. It’s a reversal in thinking, so this part needs to be done carefully. If you’re going to launch the category with a Super Bowl commercial, then you’ll be able to skip this step.  

Launch the Category with Intention

When you design a new category, no one will hand you business. You are creating a new market. That means you get to mold and shape the market. Therefore, find those who will or could be market spokespeople and encourage them to be first adopters. There are those in the business world who want to be the first to adopt new ideas. If you can arrange a strategic partnership with them, they can take your ideas much further than a product ad campaign. You might think of these in today’s parlance: influencers. Media influencers. Industry influencers. Association influencers. University influencers. Governmental influencers. C-suite influencers.

Designing a New Category is Not the Same as Marketing

This is the worst news for any CEO and the marketing team. If you design a new category, that category has no business. It’s not even on the radar of industry metrics. While you might own 100% market share of the new category, no one is buying a category of which they’ve never heard. So the news is this: You’re starting at zero.

Your team must realize that this is the slow road to glory. When you get there, everyone will look back and realize what a brilliant move it was. But on the path, you’ll wonder what crazy person decided to choose the path. When you design a new category, you’re creating what many will realize is a brand new problem for which they need a solution. You’ve created a new ladder in the mind. That’s not easy to do.

And because this task is not marketing, don’t assume the budget should come from marketing. If you rob Peter to pay Paul, you may have short-term pain or worse yet, a cataclysmic failure. Set aside a separate budget for this initiative. And give it time!

Don’t Forget the Marketing

This is painful to grasp for those who oversee budget-watching, but after all of the effort to build the category, some category builders forget the marketing of the product or service. In that regard, this is where a marketing budget can be set that is on par with a product launch. Not your regular marketing, but the size of what it takes to bring a product to market in the now-departed category. For some, that could be the size of the budget it took to build the category itself.

There is No Timing

Another pain point is timing. There is no way to anticipate how quickly a market will adopt a new category. Apple’s Newton is a prime example. Launched in 1994, it was off the market by early 1998. It didn’t “re-appear” in the form of an iPhone until 2007! That was four years of mediocre sales and ultimately, a failed product launch. However, it should be noted that Apple never tried to build the category. They simply launched the product and kept advertising it hoping “people would figure it out.” If you don’t have a core business that will support your business during the stretch necessary to build the category, then it may be best to avoid designing a new category in the first place.

Strategy Before Execution

We say this too frequently for most folk’s taste, but if your strategy is wrong, no manner of great execution will overcome it. In fact, the more robust the execution, the faster the idea may fail — IF the strategy is wrong. So now, we’ve come full circle. And that is, getting the name of the category right, designing it well, and building it to a market size capable of keeping you in business.

Designing a new category is challenging. There is no denying it. And then once you design it, you must put the full force and effect into marketing it – first public relations, then advertising, or preferably, both. Finally, market your product as synonymous with the category, with a budget you would expect for a full throttle product launch.

If you’re convinced your product would perform best in, and need guidance on designing, a new category, contact Innis Maggiore.