So What? The Concept of a Category

Defining Your Category – 5 Rules

1. Products compete in categories, not markets
2. A customer’s thought process is to slot you in to a category.
3. A category map helps to work through the different categories in your market space.
4. Don’t straddle categories - to be successful you need to anchor yourself in one.
5. Don’t create a category to be unique – categories evolve out of market dynamics.

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Markets are made up of categories of solutions, each with their own competition, rules of engagement, market growth rates, and business practices. Knowing the category your product competes in and the dynamics of that category can be a powerful tool for focusing your business and helping you to make better strategic decisions. It is also a great way to anchor your discussions with businesspeople – customers, partners, investors, and even your own employees.

To illustrate the concept of a category, let’s take the example of the personal computing marketplace. This is a mature market and so there are numerous categories that have evolved over time. Customers looking for computers today can choose between multiple different categories of solutions:

• workstations,
• desktops,
• notebooks,
• PDAs,
• And handheld devices such as the Blackberry

offer a level of computing power. These alternative solutions are the different categories in the personal computer market today. Customers look for different features and product values from each of these categories of solutions.  For example, customers looking for a notebook consider weight a key attribute, whereas customers buying workstations consider processing capability. This is why the competition in each category tends to compete more with “in category competition” vs. other categories.

Tool – A Category Map

A category map is a useful tool for defining your market space.  The personal computer category map below provides an illustration. The bubbles inside the axes are drawn to indicate the relative market size of each of the categories. Notice the positioning of the categories relative to one another and in some cases the overlap. Categories often compete to steal share from other categories and as markets change, so do category attributes. Regardless, once you’ve anchored yourself in category you can easily watch the developments in your category and the drivers and dynamics that will impact you.

Example: Personal Computer Market Space

Defining your Category – Don’t Do This:

Don’t be fooled – defining your category is not always easy.   As we’ve seen, the choice of “axes” for a market map is not obvious.    Three pitfalls you should be sure to avoid:

• Don’t try to create your own category – Unless you plan to spend considerable time and money educating & building the market. For start-ups, it’s better if you fit in to a growing category that already exists in the customer’s mind. 
• Don’t straddle categories – The danger of straddling two categories is you don’t belong anywhere.  Every successful product knows its place in the market. 
• Don’t rush your analysis – Spend some time thinking about this issue. Get your team together and draw several maps. Getting your category right is worth some thought.