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Woman searching for yogurt in a supermarket.

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Many brands grapple with a fundamental problem: how do you profitably build a company in hyper-competitive markets?  Grabbing business from a competitor is a difficult and expensive proposition. Raising your prices, unless delicately handled, can be risky. Lowering your prices can just lead to a price war and reduce your gross margin. Driving incremental product innovation is a common strategy but one with low odds of success when the value-add may be minor and the product remains comparatively undifferentiated. There is a better approach to reigniting growth: create your own category.

There have been many successful examples of brands that have created new categories like Vitamin Water in bottled water marketplace, minivans by Chrysler, Greek-style yogurt by Chobani and the iTunes music store by Apple. According to research published in the Harvard Business Review, brands that create new categories generate much higher financial returns than incremental innovators.

Category creators have to do a few things right to produce their industry-leading returns.  First and foremost, they appeal to consumers by:

– Providing a unique offering that delivers compelling packaging, convenience, functionality or experiential benefits. Xbox, for example, enabled friends to play each other over the Internet.

– Creating a new pricing model that is attractive to consumers. For example, iTunes allowed consumers to buy only what they want (i.e. individual songs or streaming) at a low price.

– Re-engineering how a product is delivered and distributed. Consider how Netflix revolutionized the delivery of movies by leveraging a cloud based platform for anytime, anywhere access.

As a founder or marketer, you have the ability to marshal resources and create powerful marketing campaigns. Before you do that, consider if it makes more sense to re-position or create a new category for your brand. Creating a new category is typically financially rewarding, too, with greater growth and higher valuations for the company or brand. It’s not an easy endeavor but with sound brand strategy, fortitude and perseverance you can make your vision of creating a new category a reality. Here are five key elements of building a new category:

– Start with the why. Simon Sinek’s book “Start With the Why” provides valuable insight on how great leaders inspire action. When it comes to creating a new category, it is all about the “why”. People don’t buy “what” you do or “how” you do it, they buy what they “feel.” It’s difficult to create a category without inspiring others and getting them to realize they had a problem they didn’t know existed or that fundamentally changes how they interact with the world. No one asked for Vitamin Water.

– Build the right team. Honestly, this sounds simple but marketing and product teams fail, not because of their talent, but because the team was not aligned correctly and did not have the buy in of top leadership. Another thing you need that’s not easily examined is guts. It takes a certain amount of risk to succeed and some teams just can’t seem to take the all-out risk. You also have to have a team that is not full of themselves and has a high degree of customer empathy. You can’t create a team that just wants to “sell.”  They have to create the product or service with such a strong customer benefit in mind that the customer wants to buy the product.

– Bigger is not always better. Even with a huge marketing budget, it’s tough to create a new category. However, it certainly can be done and doesn’t always need to break the bank. In fact, a modest budget is often a driving force in being resourceful, creative and thinking about things differently. How do you find and leverage your most passionate enthusiasts? How do you make key influencers gush about you? How do you leverage social media to create unbridled demand for your product or service?

– Competition is good. It may sound counterintuitive, but when you are creating a new category, competition helps legitimize a market and increases the size of the overall category pie. This is especially true for startups. You will actually benefit if others are spending their marketing dollars to help popularize the value of what you are doing. The key, however, is to preserve your first “mover” advantage, being first to market, and continue to find ways to elevate yourself above the crowd, while maintaining both a product and thought leader position. Never for one minute believe you don’t have any competition.

– Stay focused on your core marketing message. As tempting as it is when you have a team of passionate, creative people who want to change up your marketing messaging, success will be determined in the early days by consistently describing what you do and continuing to repeat the same message over and over and over until it clicks with your target customer. Some companies focus on getting a product to market and then marketing it. But it is important to prime the market and spend significant time early on crafting your message, testing it in the market and then repeating it often. Hopefully, the key message will be picked up and communicated virally in social media by your customers. All Chobani kept saying was Greek yogurt is better for you until we believed it.

Building a new market category is not for everyone. It takes vision, stamina and lots of guts. But when you get it right, there is amazing satisfaction for you, your company and the market that benefits from the new category created.

If you want to learn more about building new marketplace categories, get the book by the author of this article, Brands and Bulls**t. 

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