Rethinking Categories

In my almost 10 years at Gartner studying buying and advising vendor clients not a lot has changed.  While we get deeper insights, they just reinforce some of my “coming into the job” notiions:

• The best way to be better is to study customers much more than competitors
• Positioning, done right, is a foundation for strategy
• Storytelling is the best way to communicate to be remembered

But one thing has changed (and it is relevant to positioning)–my perspective on category creation.   When I started at Gartner, many of the clients I advised were smaller, newer vendors.   Back then, I talked about how costly and challenging creating a category was and almost always advised positioning in a known category.  The exceptions were if the funding existed for category creation or if you could clearly position an existing category as your primary competitive alternative.

I now believe I was wrong.   Creating  a category is essential in today’s market.   But it needs to be done with forethought.

First, you don’t create a huge category overnight.   Category creation today is really about creating sub-categories or niche markets that could grow to be bigger.   It requires a narrowing of focus to a smaller group of target customers, a different approach and point of view from the status quo and conventional thinking, and clear evidence of value and impact.

Traditional categories are for established markets.  They often have many, many vendors (too much choice) and it is hard to be noticed.  The safe choice often wins.   Traditional categories are also often so broad in terms of potential value paths that it obscures clarity.   Traditional categories worked when their were less options and less people involved in buying.

Today, we see new technology buyers starting from exploring options to solve a problem across many categories.  Got a payroll problem?   You can buy payroll services or payroll software.   Want to improve customer experience?  You could train your people, build a better web site, redesign your product, outsource customer support, etc.    Many of these buyers don’t start with a category–and if they do, they might be more confused.

And that is really the essential idea.  Categories exist to add clarity and to help organize thinking.  But in every industry, we’ve seen an explosion of options that renders basic categories almost irrelevant.  Both buyers and vendors need to dig deeper to discover or create clarity.

What does that mean for my go forward recommendations is asked about category creation?   Reiterating some of above:

1. You can start with existing categories to establish something of a playing field.  And you want a playing field.  If you are the only option on the field, then buyers will question the value.  The others on the field need to be similar, but don’t have to be just like you.
2. If you are truly new, be clear on what you are an alternative to–and make sure you choose something that is well understood.
3. Create a story of the “before you, after you” structure to make the case for the difference.  Express a clear point of view.
4. Don’t position your new sub-category as “ideal for everyone.”  It won’t be, particularly remembering that the majority of the market is risk and change adverse.  This “who you are for” is an essential part of the story.
5. Remember the core goal of a category:  To offer clarity to a group of customers to help them organize their thinking, evaluations, and decisions.

The way you, and your customers, categorize your products is critical to success and growth.    Be thoughtful about how you approach this decision.