Category strategy: the magic weapon to make the brand occupy more than 70% of the category's profits

This article elevates classification to a strategy and provides an in-depth analysis. This is the category strategy that everyone is familiar with today.

1. Category Tracing

The application of the word "category" in business can be traced back to the 1990s, when Procter & Gamble changed its original brand manager system to category manager system, that is, from one person being responsible for one brand to one person being responsible for one product category. At that time, category was a management concept used to manage products. Later, Carrefour defined categories as: classification of goods, and a small category represents a consumer demand.

It was not until 2004 that Reese drew inspiration from The Origin of Species and published The Origin of Brands, which redefined brands and the philosophy and methods of brand creation. The book points out that the driving force of business development is differentiation, which gives birth to new categories. A true brand is the representative of a certain category. Once the category disappears, the brand will also disappear. At this point, category is no longer a management concept but becomes a mental concept.

Thirteen years later, the three founders of Play Bigger published the book "Becoming a Unicorn", in which data cited revealed the common characteristics behind world-class companies such as Google, Facebook, Apple, IKEA, etc. - becoming category kings, and category kings usually obtain 76% of the market value of their categories. The term "unicorn" has therefore become a new concept that is often mentioned in the business world.

In May this year, the Chinese version of "Creating New Categories" was freshly released. It is a book by world brand expert David Aaker. From the perspective of brand relevance, this book reveals that the only way for a brand to grow (almost without exception) is to create new "must-haves" in the minds of customers, thereby defining new product segments and building benchmark brands with competitive barriers.

From marketing to investment circles, to brands, everyone has unanimously and at great length discussed the value of categories, which is enough to prove the importance of categories in modern business.

2. Biological Basis of the Category

Although all three books cite many business cases to demonstrate the importance of categories. But I always feel that it is not enough, after all, the underlying logic of the category has not been fully explained.

Since the categories introduced in this article target the mind, I will try to explore the biological basis of categories from the perspective of cognitive science.

MIT cognitive scientists proposed in a paper, "Category Learning in the Brain," that the brain does not have a single "category area." Categories are represented in a distributed manner throughout the brain, involving multiple neural systems. They are connected to each other in trillions of different ways.

Later, with the help of neuroimaging technology, the biological basis of classification was finally discovered. The scanner monitored a group of volunteers who were asked to create or think of different categories. These categories include natural objects that resemble plants or animals, or man-made objects that resemble tools or musical instruments. The scanning technology enables precise positioning, typically within 1 cubic millimeter, allowing scientists to clearly see where specific neural activity occurs.

This research suggests that the categories we form are real, biological entities that have specific locations in the brain, but that these locations are scattered across different areas of the brain.

That is, whether using pre-classified categories or improvising them, a specific, reproducible area of ​​the brain is activated. This applies not only to categories that share physical similarities (such as edible leaves) but also to categories that share conceptual similarities (such as tools that can function as hammers). This proves that classification is an innate ability of the brain, and also proves that there are indeed category grids in the brain.

In the era of information explosion, we need to make a lot of decisions every day, and the classification function is particularly important. After all, classification can help the brain transfer a lot of work. For example: If there is a drawer dedicated to baking supplies, we don’t need to remember the locations of sifters, rolling pins, flour, etc. We only need to remember the category of baking supplies and tools to find these tools, which saves a lot of cognitive resources for the brain.

Similarly, in the commercial world, people are faced with a wide range of commodities and various brands. The brain subconsciously categorizes brands and then chooses the brands that rank among the best in the category. This is also the normal state of the brain when making consumption decisions.

After talking about so much theoretical knowledge about categories, let’s focus on how to create new categories.

3. Create new categories

Innovation is the driving force behind business development and one of the sources of new product categories.

David Aaker divides innovation into three categories: incremental innovation, substantial innovation and transformative innovation. Among these three types of innovation, only the latter two can create new product categories.

The biggest difference between substantive innovation and transformative innovation is that transformative innovation will affect the competitive landscape of the entire industry, while substantive innovation will not. For example: The automobile was a transformative innovation because it replaced the traditional horse-drawn carriage. Distilled water is only a substantial innovation because it still coexists with other categories such as mineral water, natural water, and snow mountain water.

The most important source of innovation comes from technological progress, which is particularly evident in the technology industry. For example: digital cameras, laptops, smart phones, etc.

In addition to driving transformative innovation, substantive innovation is also inseparable from technological progress. For example: room temperature yogurt is yogurt that has been processed through "pasteurization heat treatment" technology.

In addition to technological advancement, redefinition is also a source of innovation. For example: Diamond was originally just a mineral, but after being redefined by Delbes, it became a symbol of faithful love.

Another source of new product categories is changes in consumer demand.

With the development of economy and society, consumers' demands are constantly changing. There is a saying that is often circulated in the new retail circle: In the next 10 years, under the wave of new consumerism, all categories are worth re-doing.

Consumer demand differentiation can generally be divided into: function, scenario, price and trend. For example: beverages were originally just for quenching thirst, but ordinary people drink ordinary water, while rich people drink high-end water; when water is mixed with some additives, its functions are differentiated into preventing internal heat, replenishing energy, replenishing vitamins, etc.; when drunk in different situations, there are breakfast milk, meal aid drinks, and after-meal drinks; when the health trend emerges, it is differentiated into sugar-free, low-fat, and natural drinks.

If you want to find opportunities for category differentiation, you can try thinking around these four directions, which may yield unexpected results.

When you find an opportunity for a new product category, don’t be too happy. After all, the next step is what truly determines the success or failure of the new product category.

4. Category Definition

The following situation often occurs within companies: a great deal of innovation work has been done, and new categories have gradually taken shape, but the categories have not been defined, so the innovation only remains at the product level and cannot enter the mind, thus missing the opportunity to create and dominate a new category.

There are three key links in category definition: category naming, category identity design and category story.

1. Category naming

In marketing, name is the most important decision for a company, no less important than creating a new product category. Because the name is most closely connected with the consumer's mind, a bad name is enough to ruin the future of a new product category.

When consumers come into contact with a new product category, they often wonder, what is this? Therefore, the primary function of the category name is to tell consumers who I am directly and concisely. Therefore, the category name must be easy to understand.

To this end, Feng Weidong proposed four key points for category naming: rooted, concise, straightforward, and pleasing.

Having roots means that new product categories must have sources. For example, the root of "laptop" is "computer", the root of "ice black tea" is "black tea", and the root of "room temperature yogurt" is "yogurt". The role of the root is to allow customers to immediately associate what this category is, making it easier for them to generate consumption demand.

Short. Of course, the shorter the name, the better, so that it can be easily remembered and spread. This is easy to understand. People are generally overloaded with information nowadays, so short names are easier to remember. For example, there are two terms, "computer" and "computer". Obviously, the term "computer" is more popular now because it is shorter. For those names that are too long, customers will automatically simplify them, such as "supermarket" becomes "supermarket" and "four-wheel drive off-road vehicle" becomes "four-wheel drive off-road".

Being straightforward means that it should be easy for consumers to understand. Tongyi has suffered this loss before. Originally, Tongyi was the inventor of the air-source water heater, but it named it a heat pump water heater, which made consumers very confused. The cognitive barrier was not resolved until "heat pump" was changed to "air energy". After all, the transition of water heaters from gas, electricity, solar energy to air energy is very smooth and very consistent with consumers' cognitive framework of water heaters. However, the category of air-energy water heaters no longer belongs to Tongyi.

Favorable impression means making consumers feel good and valuable when listening to your content. For example, "margarine" and "margarine" should be called "vegetable cream" and "vegetable butter" so as not to cause bad associations. There is also "pure wine", a category name that is too modern and technological, and it is easy for consumers to associate it with "water added to wine".

If we compare category definition to introducing a stranger to a friend, after introducing his name, the next step is to introduce his appearance characteristics.

2. Category identification design

Let's take a look at a picture first:

There are three objects in this picture. You can tell at a glance that they are all computers, but they are three different types of computers: laptops, all-in-one computers, and desktop computers. This is the role of category identification, which can not only distinguish whether the items belong to the same parent category, but also distinguish whether they belong to different sub-categories.

This is also the core of category identification design: it should be similar to the parent category, but not exactly the same.

Why do you do this?

It is easier to understand why you need to be similar to the parent category. Since you are differentiated from the mother category, some of your genes should come from the mother category, so you are naturally similar to the mother category.

By the same token, even if it originates from a parent species, the genetic process will mutate and it will naturally be different from the parent species.

Let’s think about it more deeply. What would happen if it was exactly the same as the parent category? For example, I said the picture below is enzyme laundry detergent.

You may find it strange because it is no different from ordinary laundry detergent. So I want you to believe that it is enzyme laundry detergent. I can turn the enzyme in the laundry detergent blue and tell you on the package that the blue powder is the enzyme, so that it makes the enzyme laundry detergent more credible.

This sounds simple, but many brands often don’t know how to design category identity for their products. For example: anti-odor socks are said to be added with silver ions, including Lululemon sportswear. I once asked a salesperson what is the difference between your sportswear and Nike's. She told me that Lululemon sportswear is added with silver ions, which can inhibit bacteria and prevent odor.

But whether it’s anti-odor socks or Lululemon sportswear, their products look exactly the same as other brands, and based on the appearance alone you’d think they’re in the same category. Besides, consumers will not take the time to ask or research.

Now that we have discussed why category identification is so important, let’s talk about several dimensions for establishing category identification.

Generally speaking, category identification is mostly based on products and packaging.

Like the computers and cars mentioned above, their category identification is based on the products.

Products like dairy products and cosmetics are often built on packaging.

Of course, some individual categories can be built on logos and colors, such as IBM's ThinkPad, which subdivides the business computer category, uses black as a category divider, and focuses on black.

However, it is very difficult to identify the color as a color because it is not unique. Even a unique color, like Tiffany blue, cannot become a category distinguishing color because it is created by you and others cannot use it. It can only be used for brand identification.

As for the logo, in the banking category, ever since Chen Youjian designed a logo with copper coins as the visual concept for the Bank of China, many banks have followed suit and achieved such a category identification.

Of course, ever since Tmall created its logo with animals as its visual concept, the e-commerce industry has become an animal world. This is also a case, but it is the only one that remains.

After introducing this person's name and appearance, we also need to introduce his unique experience, that is, his legendary story.

3. Category Story

There are three key points to telling a good category story:

• Since categories come from differentiation, you have to make it clear which parent category your category was born from.
• What are the advantages of this new category compared to the parent category? In other words, differentiation from the parent category.
• Tell a story. If you want long copy to be attractive, you must transform it into a story. In order to make the story attractive, the text must be deliberately arranged to achieve a dramatic effect.

For example, although Lao Fan’s instant noodle restaurant has achieved the first two points, its copywriting does not attract consumers because it lacks drama.

The best storyteller in the dramatic genre is none other than Boss Joe. After Jobs returned to Apple, he created three epoch-making new product categories: iPod, iPhone and iPad. When these three categories were first launched, in addition to explaining the first two points clearly, Jobs also brought out the drama to the fullest.

When the first generation of iPod was released, he first started by talking about the lack of a leading brand of music players. Then he went back to the development process of music players, starting with old categories such as CD players, MP3 players, flash players, etc., calculating their song capacity and the average price of each song, and talked all the way until the birth of iPod, and then presented the advantages of iPod one by one.

When he released the first generation iPhone, he said he would release three products, and then he changed the subject and revealed that these three products were actually just one product, called the iPhone. Then compare it with old products to highlight the advantages of the iPhone.

When launching the first generation iPad, he said that Apple defined computers, and in 2007 it defined smartphones. Then, in a twist, he asked if there was room for another product between the iPhone and Mac that would provide a better experience than both mobile phones and computers. He then compared it with netbooks, saying that netbooks were just cheap computers, and finally launched the iPad. I will introduce the advantages of iPad one by one later.

Final Thoughts

Finally, let me add two points of knowledge related to brands.

• First, when creating a new product category, it is best to use a new brand. After all, the existing brand and the old category have already been associated in consumers' cognition. It would be too costly to re-associate the original brand name with the new category. But this does not mean that the brand assets accumulated previously have no role to play. It can appear as an endorsement.
• Second, categories have their own identification, and brands have their own identification. Never confuse the two.

Author: Wu Shuo Baidao

Source: Wu Shuo Baidao