Define Your Own Market Category

The only way to achieve real sales and profit growth is to create a new category or subcategory in which competitors are weak or irrelevant. It is Econ 101: Create an environment with weak competition. The alternative, fighting the “my brand is better than your brand” preference war, is rarely successful at changing market positions because of the resulting customer momentum. Successfully creating a new category or subcategory involves—in addition to finding a concept and introducing it into the marketplace—the active management of customers’ perceptions, attitudes and behaviors toward it. Here are five guidelines toward that end.

1. The new category or subcategory needs to be defined with a set of associations that should deliver a value proposition that will differentiate the category or subcategory from alternatives and appeal to customers.

It should, if at all possible, go beyond functional benefits, such as superior performance or cooler design, to provide self-expressive and emotional benefits. A richer conceptualization of the new category or subcategory will provide a stronger basis for a customer relationship and, thus, a barrier to competitors. In particular, the category or subcategory should be, if possible, provided with a personality. Oft en being a feisty underdog can add energy and reinforce the value proposition. That worked for Salesforce.com, which in 2000 pioneered “cloud computing” for application software. With a communication program that included an assortment of guerrilla marketing stunts, Salesforce.com positioned firms that had not adopted cloud computing as pursuing the “old way.”

The category or subcategory should be defined so that the boundaries are clear and potential competitors will be classified by customers as missing some “must-haves”—and thus not relevant. The challenge is to make those “must-haves” visible enough to affect customers’ decisions to consider the brand.

2. Strive to make the brand the exemplar of the category or subcategory.

When the brand gains exemplar status, the brand strategy and its associated brand building can play the role of building the category or subcategory and developing its associations. In addition, the brand will automatically have credibility, visibility and authenticity with respect to the new category or subcategory.

How can a brand become an exemplar? Focus visibly on the category or subcategory. Be a thought leader and innovator of the category or subcategory. Disneyland is the exemplar of theme parks and it continues to innovate. Become the early market leader in terms of sales and market share. It’s hard to be an exemplar and to leverage that role without market share leadership.

3. Focus on Promoting The Category or Subcategory and Not The Brand

The goal is not only to reinforce the exemplar status but also to make sure the new category or subcategory wins because that’s the heart of the innovation strategy. Even though choosing to promote the category over the brand is unnatural and sometimes hard to justify, it’s imperative. If the category or subcategory wins, the brand also will win.

In 2000, Barclays Global Investors (BGI) came to believe that exchange-traded funds (ETFs) were relatively unknown and had the potential to be a major investment vehicle.

As a result, BGI committed to bringing the new subcategory out into the open with its iShares series of ETFs as the vehicle. BGI had a multi-year, well-funded, broad-based program to establish the new subcategory that involved advertising, three sales teams directed to financial advisors, education seminars and a compelling website.

4. Stimulate Buzz.

A new category or subcategory will involve a substantial or transformational innovation. That often means that it’s worth talking about. One way to get the conversation started is with a story about topics such as dramatic features or benefits (the Tata Nano, with its breakthrough price of $2,000); the people behind the idea and how they brought it to life (Steve Jobs’ iPod story); how the technology developed (Ivory soap was found through a production mistake); interesting applications (Segways are used by mall cops); or a firm’s culture (Zappos’ service culture led to its domestic 24/7 call center).

5. Don’t Stand Still

Innovation, improvement and change will make the category or subcategory dynamic and the brand more interesting. If the brand achieves the status of an exemplar, it’s natural to create ongoing innovations attached to the brand that can become part of the defined dimensions of the category or subcategory. That will make the category or subcategory a moving target and will make it harder for a competitor to become relevant.

Chrysler did exactly that by continuously innovating its minivan for which it enjoyed 16 years with no viable competitor after its introduction in 1982. Every two or three years, there were significant innovations that raised the bar for competing firms. The driver-side sliding door, for example, changed the category parameters. Westin followed the Heavenly Bed with the Heavenly shower and accessories like soap and shampoo, which raised the bar.

Building a new category or subcategory is a key element of the innovation strategy.

“Successfully creating a new category or subcategory involves—in addition to finding a concept and introducing it into the marketplace—the active management of customers’ perceptions, attitudes and behaviors toward it.”