Issue No. 11: The 6 Category Strategies

There was a question that used to really bother me.

“Should I create a new category?”

Whenever a version of this question showed up on LinkedIn, it turned into a dogma war. (I hate dogma).

But one day I realized the real reason this question bugged me: it’s the wrong question.

Asking if you should “create a new category” is like asking a football coach if the next play should be a field goal attempt. The answer isn’t “hell yeah” or “hell no” it’s “possibly… if the situation calls for it.”

This is why I make the distinction between category strategy and category creation. Category strategy is a plan you’ve developed for becoming the only obvious choice. Category creation is one just path you can take to get there.

After studying dozens if not hundreds of successful brands, I’ve found 5 more – all of which, when done well, use principles from category design to show buyers why you matter. In this issue, I’ll give you an introduction to each one.

(All the examples below are from B2B SaaS, so you can compare apples to apples. But these strategies can be used anywhere. I’ll do a deep dive into each strategy in future issues, where I’ll show you more examples from other industries.)

Category Strategy #1: Create a New Category

I guess you saw this one coming. This strategy is straight out of Play Bigger, the book that laid out a blueprint for category design. It’s for brands that are developing something unlike the world has ever seen and need to educate buyers on an entirely new concept.

Category creation is the right strategy if positioning your product in an existing category would do more harm than good. That’s because when radically new ideas are miscategorized, it creates confusion in the minds of buyers and forces them to make the wrong comparisons. That can make it even tougher to get traction. Better to take ownership of the way you’re perceived than rely on pre-existing notions about an existing space.

A classic example is Gainsight, the company that developed the customer success software category. When the customer success discipline emerged, it was distinct from the sales and customer support functions. Gainsight could have positioned itself as a CRM or customer support product, but that would have sent the wrong message.

Category Strategy #2: Win an Emerging Category

If a new category is valid, other companies will rush in to provide their own solutions. That’s because they see a new market opportunity and don’t want to let it pass them by. But the goal can’t be just to enter a category, the goal must be to win the category. Research from Paul Geroski shows that most categories are eventually dominated by one or two companies, with the rest competing for a much smaller share. When a category is young, though, those winners are yet to be named.

Like those using the “category creation” strategy, a brand in an emerging category still must evangelize the category itself and create new language to help buyers grok what this new space is all about. But this strategy has an added challenge. Brands must also convince buyers that they deserve to emerge as the winner. I’ll share examples of how to do this when I do a full issue on this play.

The early chapters of Stripe fit this scenario perfectly. Stripe was not even close to being the first company to develop web payments software. But no one had been crowned the winner, either. Stripe showed the market that it understood the problem the best (and engineered the right solution). It didn’t create the category, but it won it. (Check out my deep dive on Stripe here.)

Category Strategy #3: Own a Category Niche

Once a category is mature, it’s very hard to unseat the leader. But what you can do is find a niche that isn’t quite happy with available solutions and build a product for them. Maybe they have unique needs that aren’t addressed by other products. Perhaps there’s a different geography or market segment that’s underserved. Whatever it is, if you can find it, then you can own it.

That’s what Veeva Systems did. It started off as a CRM for life sciences companies. When it was founded in 2007, Salesforce was already well-established as the leader. So instead of coming out with a “better” CRM, Veeva Systems decided to play a different game. It built the CRM that life sciences companies needed. In the process, it became the only obvious choice for that market.

Years later, Veeva Systems has expanded far beyond CRM. But it continues to focus on life sciences. Isn’t “niching down” supposed to mean settling for a smaller outcome, though? Today Veeva Systems is valued at $35B. I’ll take it.

Category Strategy #4: Grow Category Leadership

Let’s say you’ve won a category, and buyers come to you first when they need a solution. Great. Are you done? Hardly. Just because you’re on top doesn’t mean you’re guaranteed that spot forever.

That’s why brands in this situation must continually move the category forward. Not just to maintain their leadership position, but also to ensure that their category stays relevant (who wants to be the #1 player in a rapidly declining category?).

A few years ago, Salesforce approached me about refreshing their narrative for their CRM. Microsoft was making a lot of noise about how AI was going to put Dynamics 365 way ahead. Salesforce was worried about being leapfrogged. While they managed to keep the top spot, the story could have gone differently.

Brands using this strategy aren’t focused on creating a new, greenfield category per se (although that’s always an option). Instead, they are setting a vision for the future of the category and working to make it a reality.

P.S. I didn’t win that deal with Salesforce (I was still a full-time employee, and the project was way too much to take on as a side gig) but I know I’ll have another go at some point :)

Category Strategy #5: Consolidate Categories

It’s common to see new categories emerge around point solutions. For example, when Chorus.ai launched in 2015, it was the first of many “conversation intelligence” tools that recorded and analyzed sales calls. A great point solution if there ever was one.

But at a certain point, revenue for a point solution can plateau. To fuel growth, companies will often build or acquire related solutions so they have more things to sell. Consolidating these tools into a single solution can add value for buyers. Just think about how easy it is to get your checking account, credit cards, auto loan, mortgage, and IRA through a single bank.

But the strategy can go wrong, too. If a brand can’t extract value from consolidating products and show buyers how this helps them, then it’s unlikely to help anyone. (Just ask AOL and Time Warner). After all, buyers can always piece together a collection of “best of breed” point solutions if they think that’s a better route.

You can see this strategy playing out today with the battle between Gong, Clari, Salesloft, and Outreach. They all started as point solutions, but have evolved into direct competitors as “revenue platforms”. It’ll be interesting to see who wins.

Category Strategy #6: Re-imagine a Stagnant Category

Sometimes a category leader lets its foot off the gas and creates an opening for a brand with a fresh, different approach to re-imagine this category and take it over for themselves.

Zoom did this. Before Zoom, there were dozens of video conferencing tools. Webex, GoToMeeting, and Skype, to name a few. All of them were horrible to use. I used to work with a channel partner who used one of these, and even though I’m pretty tech-savvy, I could never get it to work. If there was a market leader, it wasn’t because anyone loved their product.

Zoom, however, created a much different user experience. The video codecs were much more efficient, which made conversations much more stable over poor internet connections. Pricing was $0 (for calls up to 40 min), you didn’t need to download any software or drivers, and you could use any computer. Things we take for granted now, but radically different at the time.

While Zoom didn’t create the video conferencing space by any stretch of the imagination, it had a different POV. It turned out to be just what the market was looking for.

Revisit Your Category Strategy Every 3-5 Years

Remember, a category strategy isn’t a tactical decision; it’s a strategic choice about the message you send to the market and a lens for your product roadmap. Pursuing the wrong path (or ignoring your category strategy completely) could mean missing out on an opportunity to dominate an emerging space, or worse, losing relevance.

My experience has taught me that a category strategy typically has a shelf life of about 3-5 years, especially for strategies #1 and #2. At that point, your category has evolved, buyer needs have changed, and your business has matured. When it’s time to give your category strategy a fresh look, choose wisely.

Thanks for reading.

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

I focus exclusively on aligning executive teams around the right category strategy and strategic narrative.

Get in touch with me at [email protected] or on LinkedIn.

John Rougeux
Founder, Flag & Frontier