Ten thousand words long article analysis | How to create a trend through "category killer"

How to become a favorite concubine in palace dramas? Not by being yourself, but by killing others.

How to become a winner in a business war? Break through the siege and become a category killer.

Category Killer

As early as 1969, marketing gurus Ries and Trout proposed that market competition has evolved from competing for resources to competing for "user minds." To succeed in our over-communicated society, a business must occupy a place in the minds of potential customers.

After conducting a large number of experimental studies on consumer minds, psychologists discovered that the way the mind processes information is to classify it and then name it, and what is finally stored is the name rather than the input information itself. Figuratively speaking, the user's mind is a drawer, with each layer of the drawer containing a category.

What is a “category killer”? Breaking through the siege and fitting into the grid is the "category killer".

When you think of drinking Coke, what company do you think of? Coca Cola . Coca-Cola is in your mental drawer, it’s a category killer.

When you think of fast food, what company do you think of? KFC . KFC is in your mental drawer, it’s a category killer.

There are so many companies selling Coke and hamburgers, but you only remember Coca-Cola and KFC. Only when you remember it will you buy it and use it. The company makes money.

Category killers are so awesome, so how can you become one? This article analyzes three ways to become a "category killer" and how to shape the trend through "category killer".

To facilitate your reading, please remember the formula below.

Method 1 for creating a “category killer”: Discover that your mental drawer has no name? stick!

Applicable scenario: Users are aware of the category but not the brand .

For example, what is the representative brand of ballpoint pens? Emmm, unexpected. Users have a “ballpoint pen” category in mind, which is an existing category drawer. But the drawer has no name.

How to seize the existing category drawers? Make your brand synonymous with the category.

Case 1: Is MUJI really “brandless”?

MUJI is a grocery brand from Japan, which means good products without brand logos in Japanese. The products focus on concepts such as simplicity, conciseness, environmental protection, and people-oriented, and there are no brand logos on the packaging and product design. Product categories cover daily necessities such as pencils, notebooks, and food.

However, MUJI, which originally meant to be a brand without a brand logo, has become a big brand that is passed on by word of mouth.

Did MUJI create a category?

No. Pencils, notebooks, and food were not invented by him; they were all existing categories. But he won by finding categories that users had no brand awareness of and then branding these categories. By branding the categories, we can occupy the minds of users.

Case 2: Why did Keep launch a treadmill instead of a sports bracelet?

From a brand perspective, let me ask you which brand of treadmill is good? In fact, you have no idea. Just like when Xiaomi first appeared, there were just a bunch of copycat Huaqiangbei Android phones with no brand, and Xiaomi seized this opportunity.

—— Wang Ning, founder of Keep

Smart bracelets such as Xiaomi bracelet and Apple watch have occupied the minds of users. Entering the field with a sports bracelet at this time is a true hero, daring to confront the tough challenges. If it were you, which hardware product would you choose to enter the market?

Can you really create a trend by just putting on a brand and occupying a category?

Let’s take a look at the outdated fresh food e-commerce category and how it has carved out a niche in second- and third-tier cities by creating a “category killer”.

The four trillion yuan race

Fresh food is a 4 trillion dollar market. As of 2017, the transaction volume of the fresh food market reached 1.8 trillion yuan, of which online accounted for 7.9%, and the market potential is huge.

In 2015, a large amount of capital began to pour into the fresh food industry. In 2017, capital began to concentrate on the top companies. MissFresh and Yigu Fresh each received over 100 million US dollars in financing . At the same time, the industry entered a reshuffle phase. Zhongshang Huimin acquired Aishengfeng, Bairuoyuan acquired Yimixian, Xuxian and Qingnian Caijun went bankrupt, and Duodian cooperated with Zhongbai Group.

The industry is developing rapidly in a red ocean. In 2018, a new form emerged - "community fresh food", which became the category killer in this red ocean.

The “category killer” of fresh food e-commerce—what is a category?

Compared with other fresh food platforms, the characteristic of “Community Fresh Food” is that it is close. It penetrates into users' communities like the capillaries of a city, becoming a device that users can see and touch. Community fresh food means opening a vegetable store of about 100 square meters directly in the community.

Since the fresh food category is already a drawer in the minds of users, let’s see which people’s drawers don’t have names yet?

As for the drawers in first-tier cities, NONONO. First-tier cities are already exploding with information and are too saturated. MissFresh, HEMA Fresh, Xiaoxiang Fresh, 7fresh (Eunuch Jiang can speak on the spot for 3 minutes non-stop).

Consumers in second- and third-tier cities purchase their products through nearby farmers’ markets, mom-and-pop stores, etc. How can there be brand awareness in this environment? It would be unacceptable not to post it.

Jiang Taigong’s summary: The brand gap in the minds of second- and third-tier cities provides an opportunity for community fresh food entrepreneurs .

The “category killer” of fresh food e-commerce – what is the killer weapon?

Have you ever done a math problem in the second grade of elementary school?

A 10㎡ swimming pool has an inlet that takes in water at 3㎡/h and an outlet that discharges water at 2㎡/h. How long will it take to fill it up?

As an adult, I can finally ask a question with confidence! Can the water outlet be closed? !

Okay, let’s look at the pain points of the fresh food industry with this kind of adult courage.

(1) Pain points of the entire industry

The gross profit margin of fresh products is high, but the product loss rate is also high. The water flows in faster than the outlet and flows out faster than the inlet.

The commodity loss rate, also known as the natural loss rate of inventory commodities, refers to the ratio of the natural loss of a commodity during the storage period under certain storage conditions to the number of commodities in stock, expressed as a percentage or per thousand.

The pain point of the fresh food industry comes from the outlet - the product loss rate. The loss rate of fresh food comes from rotting and decay during storage. The reason for the high loss rate is that goods need to be delivered quickly on the same day, and merchants will inevitably stock too much and cannot sell it during the process of preparing goods.

Our prices are 15% to 20% cheaper than those in the wet market, but our gross profit margin is twice that of Yonghui. Yonghui Supermarket’s direct purchase ratio of fresh produce reaches 76%, and the price difference between purchase and sale of fresh produce is about 70%. However, according to data from 2016, the comprehensive gross profit of fresh produce was only about 20%. This shows how serious the loss of fresh food is.

—— Edited from an interview with Zhang Hongliang, the founder of Zishixing Fresh Food

However, community fresh food in second- and third-tier cities can solve this problem through its “killer weapon”.

(2) The killer feature of the community fresh food category: transforming impulse buying behavior into planned behavior

• Impulsive buying behavior: It is a sudden, compulsive, hedonistic and complex purchasing behavior; in this behavior, the rapidity of shopping decision-making behavior prevents consumers from thinking carefully about various information and alternative choices.
• Planned purchasing behavior: Compared with impulsive purchasing behavior, users can wait and hold on for a while.

The demand to buy a can of Coca-Cola on the street is impulsive, but the demand to buy a box of Coca-Cola is planned. Users cannot drink this Coke for the time being, but they don’t have to go out to buy it for the next week.

When I saw the 50% off pre-sale price on Double 11, I immediately made a reservation. Although it would take 20 days for the product to be shipped, this is also a planned purchase behavior. In order to have the qualification to purchase, the user chooses to wait.

Purchasing fresh food in first-tier cities is an impulsive buying behavior and a low-frequency and irregular demand. I get off work early on Monday, relax during the Mid-Autumn Festival, and my friend wants to eat homemade scrambled eggs with tomatoes on his birthday. This is the driving force, so one-hour delivery is a necessity.

But in second- and third-tier cities, this is not the case. In these cities, buying fresh food is a high-frequency and regular demand. I have to cook every day. If I don’t cook, my wife, children and dog will have nothing to eat. The regularity and high frequency of demand mean that fast delivery of fresh food in second- and third-tier cities is not important. What's important is not fast delivery, but on time. Second- and third-tier cities can guide users to make planned purchases.

Community fresh food in second- and third-tier cities can give up one-hour delivery. Users can make a reservation one day in advance and have it delivered the next day. Although there is a delay in time, users do not feel it obviously. Although, this will take some time to educate the market.

Jiang Taigong’s summary: How can community fresh food reduce the loss rate? By taking advantage of the demand characteristics of second- and third-tier cities, user behavior can be changed into planned purchasing behavior, which will subsequently develop into a C2B next-day customization model, or group buying based on community social scenarios.

summary

How did community fresh food become a category killer?

1. Seize the category: There is a brand gap in the minds of users in “second- and third-tier cities”. If we don’t seize it, will we leave it to hatch chicks?
2. Possesses a killer feature: Community fresh food can transform the impulsive buying behavior of "second- and third-tier cities" into planned behavior, reduce the product loss rate, and solve the industry's pain points.

The second way to create a “category killer”: one company occupies a large mental drawer? dismantle!

Applicable scenario: Many companies occupy a large drawer in the mind. For example, Taobao is all about shopping, and you can buy any product on Taobao. For example, Meituan is about food, drink, entertainment, and any local life services can be found on it.

This is an opportunity for entrepreneurs . They can pick a small category from a large category, specialize in it , and then dominate this small category.

Case 1: Miaya Baby, why can maternal and infant e-commerce rise?

E-commerce platforms such as Miayabeibei provide mothers with one-stop shopping services from preparing for pregnancy and childbirth to raising children. Because of its specialization, it has seized the small category of maternal and child products from the mass consumer goods.

Case 2: Why are the headlines so powerful? Is 36kr so powerful? Are all the small self-media accounts no longer active?

No, Jiang Taigong is still working hard and tirelessly, his ideal is in the blue sea and blue sky~

An 8-ton elephant cannot pick its nose, but a 70kg man can do it very well. - Jiang Taigong

Can we really create a trend by breaking down large categories into small categories and then occupying small categories?

Let’s see how “second-hand books” became the hottest product in 2018 in the minds of entrepreneurs by shaping themselves into a “category killer”.

Are second-hand books popular again?

How to buy paper books? Dangdang and Amazon in 2017, and Duozhaoyu in 2018.

When Taobao, JD.com and other e-commerce software were dominating their markets, who would have thought that the competitor Pinduoduo actually emerged from social software.

The same scenario appears in the field of second-hand transactions. Xianyu and Zhuan Zhuan, which already occupy 90% of the market share, never imagined that various second-hand book e-commerce platforms would emerge on WeChat in 2018.

History doesn't repeat itself, but it does rhyme. - Mark Twain

Second-hand book “category killer” - what is the category?

Whose job has been taken away by second-hand books? Xianyu and Zhuanzhuan.

When you think of Xianyu, what categories do you think of? Second-hand 3C products, second-hand home appliances, second-hand clothes, second-hand gym membership cards...

stop! all = none

The knowledge of this cumbersome category is equivalent to no knowledge. This is an opportunity for new entrants. If you can excel in one of the small categories, you can occupy a part of the user's mind.

It's not the quantity that matters, it's the possession that matters that matters.

Jiang Taigong’s summary: Entrepreneurs in the second-hand book category have taken a piece of the pie from Xianyu and Zhuan Zhuan. The forest is so big that just cutting down a few trees would be enough to burn for a whole winter.

Second-hand book “category killer” – what is the killer weapon?

1. Pain points of the entire industry

The pain points of the second-hand industry come from the supply side, that is, second-hand sellers. Second-hand sellers on the C-end do not pursue maximizing profits but minimizing losses.

(1) Second-hand sellers have neither the willingness nor the ability to increase the number of goods, and most goods are unique.

Is Taobao a pure C2C? Actually it is small B to C. Xiao B is driven by commercial purposes and will try his best to maximize his profits. In order to pursue high profits, Xiao B will try his best to ensure that the quantity of goods is sufficient.

As for second-hand C2C, merchants have very few items. If a seller has a second-hand mobile phone, a second-hand copy of "The Kite Runner", and a second-hand TV, he is already considered a big V.

(2) Second-hand sellers have no pricing power

The pricing of second-hand sellers will be affected by the endowment effect. Since they are selling goods that they already own, they will ask for an excessively high price due to "loss aversion" when selling the goods. It's like a goddess may have no feelings for a otaku, but if the otaku pursues the goddess for eight years and then leaves. The goddess' psychology will be turbulent because of " loss aversion " (don't think too much, she won't marry you, she is a turbulent person)

At the same time, some second-hand sellers hold the mentality of "sell it quickly, my god it takes up space" (hahaha, this sentence is nonsense), which leads to chaos in the overall price environment of the market.

Endowment effect: Once an individual owns an item, his evaluation of the value of the item will greatly increase compared to before he owned it. It was proposed by Richard Thaler (1980). This phenomenon can be explained by the "loss aversion" theory in behavioral finance, which holds that a certain amount of loss will reduce people's utility more than the same amount of gain will increase their utility. Therefore, people's weighing of benefits and harms in the decision-making process is unbalanced, and their consideration of "avoiding harm" is far greater than their consideration of "seeking benefit". Out of fear of loss, people often ask for too high a price when selling goods. ——Baidu Encyclopedia

In short, the goods sold by second-hand sellers are unique items, and the difficulty of pricing by second-hand sellers is a pain point for the entire industry.

2. The killer feature of second-hand books: using standard products to solve the problems of orphan products and difficult pricing

Briefly introduce standard products and non-standard products. Whether there are specific functional parameters is an important basis for distinguishing standard products from non-standard products.

• Standard products: Books, 3C digital products, home appliances, etc. that have specific functional parameters are all standard products. For example, when selling Apple phones, there are only models such as iPhone 6, 6s, and 7, and each model has different sub-models such as 16G and 32G.
• Non-standard products: There is no clear distinction between models. For example, clothing includes men's clothing, women's clothing, and children's clothing in different styles. There are also different types of clothing according to the season, and there are no clear model categories. Non-standard products are of various kinds and cannot be measured. The three T-shirts below look exactly the same, but if you look closely, you can find 100 differences.

Books are standard products. Standard products can solve the pain points of the second-hand industry.

Duozhaoyu's second-hand business has two focuses:

Unified recycling: Change the C2C model to the C2 B2C model. In other words, you are not selling second-hand books to users. Instead, they sell second-hand books to Duozhaoyu, which is responsible for the aggregation and classification of second-hand books. Duozhaoyu does not collect all books. Most of the books it recycles are best-selling social science books. Because the categories are limited, the types of recycled books are concentrated, solving the problem of orphan books.

Smart Pricing: Smart pricing based on the supply and demand of books. If the supply of a book exceeds the demand, its price will gradually drop, and then it will become 50% off or no longer be sold. If the supply and demand of a book is relatively balanced, we usually buy it at a 30% discount. If the book is of good quality and relatively scarce, we will buy it at a 50% discount.

Jiang Taigong’s summary: By utilizing the standard characteristics of second-hand books, the problems of difficult pricing and unique items in the entire industry have been solved.

summary

How did used books become a category killer?

1. Seize the category: Get a share of the large categories of Xianyu & Zhuanzhuan
2. Possess a killer feature: using standard products to solve the problems of unique products and difficult pricing, and address industry pain points.

The third way to create a “category killer”: Is your mental drawer not big enough? Expand

Applicable scenario: If you are lucky, you occupy a category in the user's mind. It has become a category killer. But your profits are not enough to support a company, you earn too little money.

what to do? Expand the drawer.

Case 1: Lengshenling toothpaste: The ceiling is 200 million

Lengshenling toothpaste has become a well-established toothpaste brand because it occupies the anti-allergic category, but Lengshenling's sales have always hovered around 200 million yuan, and there is a downward trend. The problem with Lengshenling lies not with its brand but with its category. The primary problem facing Lengshenling is expanding its product category space. "Anti-allergic" is a professional term, and consumers are not clear about what symptoms belong to tooth allergy. Lengsuanling should continue to educate users what are the symptoms of tooth allergy and when to use Lengsuanling.

As the representative and leader of the category, the brand must take responsibility for educating and promoting the category in order to gain the greatest return from category development.

A leading brand should drive the category, not the brand.

Case 2: JD.com started out by selling 3C digital products, and then expanded its product categories to all categories, declaring war on Taobao. If JD.com still only sells 3C products, its influence will be greatly weakened. Brother Qiang doesn't need to be on the headlines anymore...

If your market share is 10%, then what you need to do is increase your market share. Beat your competitors and get a bigger piece of the pie.

If you have 90% market share, then all you need to do is expand your market. Once you are already leading the industry, it is more difficult to increase market share. The difficulty of increasing from 90% to 95% and from 10% to 15% are not on the same order of magnitude. At this point, what you need is to make your pie bigger.

Let’s take a look at Juewei Duck Neck to see how a “category killer” expands.

Small stew, big business

When you’re watching a football game on a train and eating duck necks, which brand would you think of? Juewei Duck Neck and Zhou Hei Ya.

These two brands have successfully dominated users' perception of marinated products and become category killers.

From 2010 to 2020, in just 10 years, the scale of China's marinated products industry has increased sixfold. Juewei Duck Neck is undoubtedly the biggest beneficiary.

What is Juewei Duck Neck selling now? Duck necks, duck intestines, duck frames, duck tongues and everything else related to duck. It’s very similar to KFC’s positioning, everything related to chicken.

How to expand from the duck neck category to the “everything related to duck” category, even to edamame?

After reading this article, you will understand the secret of category expansion.

Juewei Duck Neck’s Category Expansion Philosophy

Is Zhou Hei Ya the competitor of Juewei Duck Neck? No, all snack foods.

When searching for snacks on JD.com, there are 75 brands starting with “A”. Roughly estimated, the total number of brands is expected to be 3,000.

When users are hungry, 3,000 snack brands are crying out for food.

There are 3,000 beauties in the harem, and this is how much the emperor treats them. Become a favorite concubine? It's not about doing your best, but about killing others.

The same goes for Juewei Duck Neck.

Many companies don’t even know who their real competitors are. "Rolls-Royce's competitors are likely to be other luxury goods rather than other car brands - Drucker

How to win in the snack category? In such fierce competition, how can Juewei Duck Neck, as a leader, avoid being beaten to death on the beach by the waves behind?

Let’s look at the industry characteristics of snacks. If we divide all consumer goods into four categories, duck necks belong to the category of "convenience goods". Convenience goods refer to commodities that users purchase frequently or at any time. Products that users don’t think much about when purchasing can be classified into this category.

Do users’ purchasing behaviors for convenience products remain the same? Let’s look at “biscuits” and “salt,” which are also convenience products.

“Biscuit” purchasing behavior: Will people be loyal to a certain brand when buying biscuits? No, there are too many choices of cookies. There are countless soda crackers, chocolate chip cookies, Oreos, etc. Even if you like soda crackers, the flavor choices are dizzying, including mustard, chives, etc. Therefore, for "biscuit" products, category diversity is crucial. Because users always try different ones.

“Salt” purchasing behavior: Will people be loyal to a certain brand when buying salt? Most are loyal. And you don't even realize you're being loyal. There isn't a lot of difference in salt, and once you're used to buying it, you basically just go to the supermarket and pick up a bag.

The behavior of users buying snacks is actually very similar to buying cookies. Users who are determined to buy Juewei duck neck may be unable to walk when they see Zhengxin chicken steak on the roadside.

Because users’ purchasing behavior is of the “cookie” type, selling only one type of cookie is extremely risky.

This is also why the category expanded from duck necks to "everything related to duck".

Jiang Taigong’s summary: Juewei Duck Neck’s category expansion can increase the market size and resist the fierce market competition in snacks.

Wait! There’s a pit!

By the way, let me point out a pitfall in category expansion.

If you cross it, it's a pit; if you can't cross it, it's a grave.

Looking at the picture below, Juewei Duck Neck’s category expansion is the “right approach” in the picture below. But many people have learned the "wrong way of doing things".

The right approach: Focus on your category first, grab a place in the user's mind, and then expand

Every small town in America has a coffee shop, and in big cities there's one on every other block. What kind of food would you find in a coffee shop? Breakfast, lunch, dinner, pancakes, muffins, hot dogs... Howard opened a coffee shop, narrowing the product categories to only sell coffee, and that is Starbucks . Although Starbucks now offers a variety of biscuits, cakes, and even sells cups, it is based on the fact that it has already captured the minds of users. Focus first, then expand.

Wrong approach: Blindly expand when there is no place for it in the user’s mind. This is not expansion, this is inefficient replication.

Taking the above example again, the wrong approach is to blindly expand product categories amid a large amount of homogeneous competition. That is, you were selling cups before you became Starbucks.

Users don't buy it.

Please note that category expansion is a badge of success, not a means to success.

Rich people wear nice clothes, wear nice watches and drive Rolls-Royces. But wearing nice clothes, wearing a nice watch, and driving a Rolls-Royce will not make you rich.

summary

How did Juewei Duck Neck become a category killer?

1. With moderate category expansion, a leading brand should drive the development of the category rather than the brand.
2. The purchasing behavior of "cookies" needs to be moderately expanded. Instead of selling one type of biscuit, sell multiple types to fend off competition.

Final Thoughts

This article analyzes three ways to become a "category killer" and how to shape the trend through "category killer".

This article took me more than 20 hours to write. Thank you for reading it.

Source: Grandpa Jiang (grandpa_jiang)