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Brand Differentiation

7 Strategies To Create New Business Categories

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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 a brand manager achieve this?

  1. Break customer compromises. In the Harvard Business Review article “Breaking Compromises, Breakaway Growth”, CarMax is a good example of a company that methodically broke the compromises that brands in the used car buyer category routinely made with their customers. Amazon.com broke compromises as well and created the first global megastore open 24/7.
  2. Redefine the category in a radically new way. In the book Blue Ocean Strategy Cirque du Soleil is an example of a brand that created a new category of entertainment. It falls into the “circus” category, but this brand has skillfully crafted a highly valued and differentiated positioning as everything a circus is not. There are no tents, tigers and elephants. No ringmasters. Instead it borrows attributes from other entertainment categories like, dance, music, opera and theater. It becomes something all together different–far outside the bounds of a conventional circus.
  3. 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 ®).
  4. Create an entirely new category, enabled by technological breakthroughs. The Internet enabled eBay to create more efficient markets through a global online auction platform. Apple ushered in the smart phone category with the iPhone.
  5. 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.
  6. Significantly change the existing business model. Consider what happened to Blockbuster after Netflix emerged. And consider how Netflix evolved as cable companies offered instant downloading of movies.
  7. 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. It was Pepsi who innovated the two liter bottle, increasing customer convenience and sales.

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 of the existing product categories.

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1 Comment

Serge
Twitter: Diplomat_Serge
on January 19th, 2014 said

Very comprehensive examples!

Creating a new category might need creativity and perspective oriented vision. Without those points business is destined to be changed by circumstances (adjust) instead of changing them (creating new categories).

Awesome post!

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