Wednesday, January 7, 2015

Creating New Categories Versus Battling it Out for Market Share

I have written about creating “category-of-one” brands before. Most brands spend their time trying to increase their share of existing markets. They pursue many different tactics to do so, from innovating new product functions and features and offering price promotions (which erodes brand equity) to improving product quality and creating value-added services. Some even create highly entertaining ads hoping this will help them break through the category messaging clutter. The problem with these approaches is that they are incremental and most of them can be very easily matched by the competition.

Brand managers know how difficult it can be to create brand differentiation within an existing category.  In mature markets, every market position has already been taken. True breakthroughs come only from creating entirely new categories, highly compelling new categories.

So, how does one do this?
  • Break customer compromises. Remember the Harvard Business Review article “Breaking Compromises, Breakaway Growth”? It mentioned CarMax as a company that methodically broke the compromises that brands in the used car buyer category routinely made with their customers. The Internet enabled to create the first global megastore open 24/7.
  • Redefine the category in a radically new way. Remember the book Blue Ocean Strategy? It cited Cirque de Soleil as a brand that created a new category of entertainment that was part circus and part musical theater.
  • In an industry defined by functional categories, redefine your space by customer end benefits. My Alma Mater, Rensselaer Polytechnic Institute, chose to redefine itself from a technological university (or engineering school) to a place where people could go to change the world through technological innovation (why not change the world? ®). Similarly, Paul Smith’s College did this by refocusing on the end benefit of being THE college that allows one to live and play in the six million acre Adirondack Park while receiving a college education (The College of the Adirondacks ®).
  • Create an entirely new category, enabled by technological breakthroughs. eBay is an example of this. The Internet enabled them to create more efficient markets through a global online auction platform.
  • Create an entirely new category based purely through imagination and vision. The Strong could have touted itself as one of the world’s largest children’s museums. Instead, it created the only museum of play.
  • Significantly change the existing business model. Netflix is an example of this. Consider what happened to Blockbuster after Netflix emerged. And consider how Netflix evolved as cable companies offered instant downloading of movies.
  • Rebundle existing products and services in an entirely new way. The Mexican cement company, Cemex, shifted its unit of measure from cubic yards of cement to the appropriate amount of cement delivered within the requested delivery window.

All of these require out-of-the box thinking, which usually requires rethinking business models. Finally, they require identifying new ways to provide increased customer value, ways that are outside the norms 

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