When I was in high school, there was this girl I really liked. She was smart, sporty, vivacious, unattached. In every way, a girlfriend to die for. So I mounted a campaign to win her favour: lunching when she did, signing up for the same school events, upgrading my wardrobe, and most importantly, checking out my competition to make sure I was earlier, nearer, faster and cooler than all of them. And yet, despite six months of concerted effort, I failed to even get to first base. It was only on prom night when she showed up with her date that I realised why: She was a lesbian.
I share this life lesson because the principles apply to the competitive landscape that brands find themselves a part of. To succeed, brand stewards must shrewdly define the category their brand competes in. Make a mistake here, and you could get lulled into a false sense of complacency, or simply blindsided by competition you didn’t realise existed in the first place.
Let’s start with first principles: What is a “category”? At EffectiveBrands, we define it as a set of competing products or services that either share similar characteristics with our brand, or satisfy broadly similar needs of the consumer. But why the fuss? Why is this so important?
For openers, companies and brand marketers often fail to realise the full extent of the substitutes for their brand in consumers’ minds. For instance, the marketers of M&Ms might understandably consider other chocolate brands as their only competition, when in fact consumers trade off M&Ms versus Oreo cookies and Pringles potato chips when feeling like a snack. Similarly, the makers of frozen pizza only looked at other frozen foods in the supermarket as their competition, until research revealed that consumers often walked past the freezer cabinet toward the section selling chilled cooked food. In all these instances and more, you need to look beyond the obvious competition and consider the range of possible substitutes that meet the same consumer need.
The second common pitfall marketers face, is having a limited understanding of the category size potential. When launching a brand, it’s natural to define the market narrowly. This facilitates focus; it allows you to channel your resources with purpose and potency, giving yourself the best chance to establish a foothold in the competitive landscape. But what happens when you get to #1 or #2 and dominate the market, as GE used to do? Well, motivation wanes, because it’s very hard, when you’ve got 85 per cent market share, to claw your way to 90 per cent. Often, the incremental effort outweighs the incremental return.
What smart marketers have done is to redefine their category in more broad terms. So that instead of owning 85 per cent of a particular market, they now have, say, 23 per cent of a larger market. In one sweeping move, they’ve mentally unlocked a hitherto-unaddressed universe of prospects, and unleashed motivation and drive to go after those new targets.
Challenging category conventions and redefining yours in broader terms has some favourable knock-on effects. A broader category features more product or service options, more usage patterns, and consequently more chances to innovate in the manufacture and delivery of your product or service. All things being equal, a broader category also increases the likelihood that more social, psychological or market trends can be tapped to strengthen your go-to-market story.
But not every product comfortably sits within an established category. When Apple’s iPad was launched, the market was bemused. Is this a small laptop? Is it a giant phone? Nobody knew quite what to make of it. This is usually a dangerous place—manufacturers are out on a limb when the market has no reference point for your product. But Apple isn’t like any other company. It didn’t matter that the product had no benchmark. By the same token, it also had virtually no competition. And pretty soon, Apple won over the market. The iPad created its own category. According to IDC, the global tablet market is poised to outstrip the global laptop market by the end of 2013.
This article wouldn’t be complete without taking a look at category killers that lost their way as well as their mojo. The Polaroid camera is synonymous with instant photography, and for years, effectively owned the category. But it never quite addressed the pressure of falling prices, and didn’t innovate enough to counter the rise of the digital camera. As a result, the Polaroid company is extinct today, and the few instant-print cameras that remain in existence are novelty items rather than mainstream staples.
In an adjunct space, Kodak clung to its dominance of the film category for way too long, and suffered the consequences. It was understandably reluctant to abandon its cash cow, the silver halide market, and throw its weight behind the emerging digital revolution—even though it invented the digital camera in 1976. And it paid the price: the company filed for bankruptcy in 2012.
Finally, Barnes & Noble is an example of a bricks-and-mortar brand that failed to look beyond the bricks-and-mortar space. Who would have thought that its offering was lacking? It had the best product selection, the most inviting brand ambience, the most helpful customer service. But it failed to acknowledge an online brand as its category competitor and eventually went the way of the dodo. Amazon understood that time-starved consumers are willing to sacrifice the fidelity of the physical brand experience for the convenience of the online transaction.
Marketers must appreciate that category conventions often dictate the state of play. Challenging those conventions requires foresight, insight and courage. The risk of acting is often big. But the risk of not acting is bigger still.