Issue No. 12: When Should You Create a New Category?

I have a corded power drill in my garage that can rip through almost anything. It’s scary powerful. But I rarely use it. It’s overkill 95% of the time I need to drill a hole or secure a fastener. That’s why my garage is full of other tools.

Category creation is like that power drill. It can be incredibly powerful, but if the situation doesn’t call for it, it will create a whole lot of noise and destroy my work. Better to pick a different tool. 

Category creation is like that drill. Powerful, but best when used wisely.

Today, I’m going to show when and where you should deploy category creation, and when you should pick a different category strategy.

(By the way, in Issue No. 11, I introduced The 6 Category Strategies. If you missed it, you might want to go back and read the overview first). 

Let’s Get This Out of the Way… Category Creation Is Not the Same as Category Design

If you read Play Bigger (the first book to blueprint category design), category creation might be the strategy that comes to mind. That’s because many of the examples in the book are of companies that created brand-new categories from scratch. 

But category creation and category design are not the same thing (if you hear someone use those terms interchangeably, proceed with caution). 

In my view, category creation is when you are the first to introduce a radically new concept to the world – something so different that it doesn’t fall into any existing market categories. 

Category design is the broader discipline of landing a winning position in the category where you operate. In other words, all category creators are category designers, but not all category designers are category creators.

Whew, that’s enough semantics for today. You came here to learn when to create a category, so let’s get into it.

Category Creation Is For When Existing Categories Will Confuse Buyers

I love the saying “Happiness is reality minus expectations.” A dinner at McDonald’s might be miserable if you were expecting to head to Ruth’s Chris. But if were planning to eat that gross leftover broccoli casserole from last week, a Quarter Pounder sounds pretty damn good. 

Categories work like this too.

When you encounter something you haven’t seen before, your brain likes to take a shortcut and place it in a category it’s already familiar with. That’s because your brain is wired to be efficient. For all your science nerds out there, this process is called heuristic processing.

Using heuristics works fine 99.9% of the time. 

But here’s the rub.

If you have created something radically different and don’t tell buyers how to categorize it, they won’t know what to expect. 

Instead, they’ll bring their own judgments about what that thing is for, how it works, who uses it, how much it should cost, and what it should look/smell/taste/feel like. But it’s the wrong information. 

Wrong expectations mean disappointment and confusion. 

That’s where category creation comes in. Category creation is the right strategy if positioning your product in an existing category would do more harm than good. If that would happen, you have to create a new one. It’s that simple. 

Don’t Do What This Startup Did

Sometimes brands miss this, though, and fail to create a new category when they should have. A great example is the Humane AI pin. 

If you’re not familiar, it’s a small computer you attach to your shirt or lapel, kind of like a brooch. It does a lot of neat things (a laser ink display!) but the question of what it’s for isn’t really answered. 

Humane made the mistake of leaving it to the market to decide how to categorize its product. Since there’s nothing quite like it, that means it’s at risk of being miscategorized. The same problem can happen to the engineers and designers working on a product. If they don’t know what it’s for, then how can they know what to build? Maybe that’s why the Humane AI pin is panned in reviews.

But not all companies fail to recognize situations where they should create a new category.

One example is Gainsight, the company behind customer success software. When the customer success discipline emerged, Gainsight could have positioned its product as a CRM or customer support product. After all, those categories were pretty close. However, doing so would have set the wrong expectations for what its software was designed to do. Instead, Gainsight was intentional about naming, framing, and claiming a new category they called “customer success.” They didn’t leave things to chance. They created a new category on purpose – and it was the right move. 

Here are a few more examples of pure category creation to whet your appetite:

• 5 Hour Energy (energy shots)

• Salesforce (cloud-based software)

• Netflix (mail-based DVD rental, and streaming video) 

• Burton (snowboards)

• WeWork (co-working spaces)

• Airbnb (home sharing)

• WWE (theater-based sports)

When Not to Use Category Creation

When you see a brand using category creation when it shouldn’t, it’s just a contrived effort to stand out. Way too many B2B SaaS companies made this error in the last few years. The problem is, buyers will see right through that ploy. It’s what I call “lipstick on a pig” category creation, and it never works. 

If it’s a pen, call it a pen, champ. 

Here are some additional signals that category creation isn’t the right play:

1. The market is already familiar with your category. If that’s the case, you may be better off taking advantage of that momentum and picking a different category strategy than charting an entirely different course. 

2. You’re in an emerging category where you can win. If you’re already in the race, don’t leave it just to create a new category. Instead, use category design principles to dominate the space or find a niche you can own.

3. Marketing is the only department working on your category strategy. If your product team hasn’t created something the world hasn’t seen before, you’ll be creating a category that doesn’t need to exist. (Side note: no category strategy should be worked on by marketing in isolation).

4. The future is murky. Maybe you’re still trying to figure out who your buyers are or what exactly your product should look like. Maybe it’s not clear what problem it solves. Don’t claim a category until you have some certainty.

How to Win at Category Creation

Category creation requires fortitude and confidence because it means you are the first to move on a radically different idea. You must do things that most business leaders aren’t willing or able to do. There’s already been so much written about this topic (Category Pirates and Category Design Advisors have lots of good resources), but here are some of the core ideas:

Coin new language

To create a new space in the minds of buyers, category creators must create new words or phrases that get the idea across. This language must create distinction from adjacent categories where you don’t want to be mislabeled. If you’ve ever attempted this, you know that trying to land on the right words often results in pulling out your hair. 

Educate the market

You have spent years working on your product, and you know every detail about it. Buyers know nothing. It’s your job to educate them - and show them why this new category must exist. 

Embrace competitors

Wait, aren’t you’re supposed to beat competitors? Yes, but when launching a new category, the survival and growth of the category itself is the most important thing. You need competitors to create a healthy category. Yes, there are some “category of one” exceptions, but don’t rely on that being the case for you.

Build traction beyond buyers

To get your category off the ground, you need more than customers. You need employees to help you build and evangelize the category. You need the press to help spread the word. You may even need strategic partnerships or a change in government regulations. That’s a lot of convincing to do. 

Be patient

3 years after the iPhone was introduced, just 23% of Americans owned a smartphone. Wall Street was skeptical of Salesforce’s subscription-based approach to selling software (which is now the norm). Markets need time to understand and adopt new categories. Make sure you have the runway to see that through. 

Category Creation is a Powerful Tool… Just Make Sure It’s the Right One

I’m working on category creation with one of my clients right now, and it’s the only path that makes sense (that doesn’t make it easy, btw).

But sometimes category creation is entirely the wrong approach. So before you plug it in and pull the trigger, just make sure you’re picking the right tool for the job.

Thanks for reading.

If we haven’t met before, I own a consultancy called Flag & Frontier.

CMOs and CEOs hire me to align their executive teams around the right category strategy and strategic narrative.

If you want your brand to become the only obvious choice, then reply with “Obvious” and I’ll share more details on how I can help.

Cheers ✌️

John Rougeux
Founder, Flag & Frontier
[email protected]
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