Today, companies invest lots of time and effort in complex marketing plans; understanding target audiences, defining values and designing visual identities. But very few companies stop to contemplate a much more basic question: which category are we in?
Categories are fundamental to how customers judge companies, and also how companies judge themselves against competition. So why do so many overlook the importance of interrogating their category? And why is taking the time to define where you play such a valuable thing to do?
The reason categories are overlooked
Overlooking the ‘what category are you in’ question largely comes down to legacy. In the past, a company’s category was decided for them. There weren’t many, and the lines between each of them was clear. If you sold groceries, you were a supermarket. If you sold cars, you were an automotive company.
Today, with companies spanning across many types of product and service, selling through multiple channels and converging in their use of technology, categorisation is an open question. It’s no longer self-evident where companies play; it depends on the lens you use.
This isn’t to say that companies can pick any category they like. The reality is that most are sitting at the intersection of a handful of credible options, based on how they operate and what they provide to customers. This presents an opportunity that should be carefully deliberated.
An equity story
When it comes to choosing a category, it’s worth thinking first about brand equity; the commercial value that comes from the way people think of you. Strategically, it’s sensible to choose a category that complements how you’d like to be perceived.
This is visible in the way companies as different as Airbnb and Tesla have defined themselves as ‘tech’ – integrating the positive connotations of disruption and scalability into their stories. Tesla has intentionally built a narrative around the technology inside their vehicles, such as battery ranges, self-driving capabilities and bulletproof glass; unveiling these features to the public in theatrical shows similar to that of tech companies like Apple. Brian Chesky, Airbnb’s co-founder and CEO, has long talked about his company as a tech platform rather than an accommodation provider, celebrating how machine learning has enabled him to improve search, prevent fraud and help hosts to optimise pricing.
Conversely, companies might want to avoid certain categories due to negative associations. LinkedIn defines themselves as ‘the world’s largest professional network,’ distancing the company from the turbulent world of social media. As a brand that relies on people trusting the platform to help build their careers with the right connections and legitimate opportunities, it’s smart for LinkedIn to set themselves apart from social media; a category that’s become plagued with echo chambers, data misuse and opaque practices.
A licence to innovate
A well-defined category also enables companies to signal the size of their future opportunity, particularly to prospective employees and investors. Defining yourself too narrowly ties you into a certain type of product or service, whereas defining yourself in line with a bigger ‘need’ gives you a licence to expand what you do.
Uber could have easily resorted to defining themselves as a taxi service. But they never wanted to limit themselves to moving people around in cars. From the start, they communicated a much greater ambition that made employees and investors jump on board: Uber exists to “reimagine the way the world moves for the better.” In short, it’s not in the business of taxis, it’s in the business of movement. This has ultimately given Uber a credible platform to provide services as varied as food delivery (Uber Eats), healthcare (Uber Health) and, more recently, travel services.
An expanded customer base
Categories are also an important signal for customers; it helps them to understand if what a company provides is relevant to them. With the emergence of increasingly niche customer segments, it can be tempting to put all your eggs in one (customer) basket. But here lies the danger. A category can close you off – often unintentionally – from parts of the population that would otherwise use what you provide.
Quorn started life as a food company singularly targeting vegetarians and vegans; a group which, in the UK, represents around 10% of the population. Realising that this severely limited their customer base, Quorn redefined themselves as a ‘healthy food’ company, famously partnering with openly meat-eating Mo Farah. Now targeting 70% of the population who define themselves as health-conscious, and with a belief their products are “for the good of everyone,” the company achieved consistent double digit growth throughout the 2010s.
The grey opportunity
Categorisation is no longer a black and white affair. But the grey nature of where companies play is a valuable opportunity; one that’s too often overlooked. Companies need to be more strategic in how they define themselves, choosing categories that reinforce their equity stories, signal the right level of ambition and help to expand their customer base. When it comes to defining your category: choose wisely.
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