As marketers, we have been taught to classify competitors into product or service categories. It’s a prime basis for the process called positioning. You, then, faithfully compete within your brand’s category.
It’s also been claimed that brands which are the pioneers in their respective categories are usually first in awareness, preference and market share.
So you don’t want to launch a “me too” product in an existing category.
That’s where innovation shines. If you can invent, combine, add, subtract, increase, decrease, and otherwise make your product different from the competition, you may have created a new category in which to participate. More likely it’ll be a subcategory if the product essentially provides the same function as the products in an existing category, but with a bit “extra”.
Name that category
Now category definition is certainly not an exact science. In a strict sense it’s only target market participants who define categories even if they do not consciously do so. Consumers do not think in term of categories, they think in terms of function and affordability. But market researchers and product developers like to develop a structure of categories for purposes of reporting and analyzing performance, and subsequently develop both strategic and tactical product planning.
Charting categories and sub-categories containing over 60 varieties plus multiple combinations: helpful in tracking success but customers don’t make choices based upon artificial classifications.
So defining categories is an artificial though helpful exercise.
Classification systems might help
The U.S. government, specifically the Department of Commerce, has a method of classifying business types – North American Industrial Classification System (NAICS). This system is very helpful, particularly when the U.S.Census reports its business census data by classification. But, again, consumers aren’t even aware such a classification system exists. And a majority of businesses don’t use that structure for the basis of their product classification process.
In some industries, a trade association might establish a system of product categories that assure some uniform reporting of statistics by category and subcategory. But where this isn’t the case, each business, if they are even concerned about product classification, will likely establish their own hierarchy of categories.
Positioning in a new category
When you’ve developed a new feature or use or market for you product, you may believe you can establish it as the first product in a new category, a category defined by your innovation. And your industry may, upon launch, agree with you.
But the real test is the market. Do customers believe it’s a new product, not just a “new and improved” claim for the same old product? Do retailers recognize this as a new category and display it appropriately? Will reporters and editors in the popular press proclaim it a breakthrough product? Do product sales increase at rates faster than occurred in the old category against established competition? Until then, you’re still participating the old category. That’s the market’s verdict.
The moral: the market is the ultimate arbiter concerning with whom you compete and how you are perceived.