Modern brands encompass all kinds of different products and services. Apple, which operates in many different industries, is now one of the largest players in the healthcare sector in terms of reach. Meanwhile, Amazon, another multi-category brand, is rapidly expanding its fledgling supermarket business. Recently, Home Depot and PlayStation have made their entry into the financial services industry.
But while brands put a lot of time and effort into understanding their purpose, defining their values, designing visual identities and locating audiences, very few companies stop to think about a much more fundamental question: in which category? are we located?
This is not to say that companies can choose any category they want. The reality is that most are on the cutting edge of a handful of credible options, based on how they work and what they offer to customers. This presents an opportunity that should be carefully considered.
A favorable stock story
When it comes to choosing a category, it’s worth thinking about brand equity first; the commercial value that comes from the way people think about you. Strategically, it makes sense to choose a category that fits how you want to be seen.
This is evident in the way companies as diverse as Airbnb and Tesla have defined themselves as “tech” – incorporating the positive connotations of disruption and scalability into their stories. Tesla has deliberately built a story around the technology in its vehicles, such as battery ranges, self-driving capabilities and bulletproof glass; revealing these features to the public in theatrical shows similar to those of tech companies like Apple. Brian Chesky, co-founder and CEO of Airbnb, has long talked about his company as a tech platform rather than a lodging provider, celebrating how machine learning has helped improve search, prevent fraud and help hosts lower prices. optimize.
Conversely, companies may avoid certain categories because of negative associations. LinkedIn defines itself as “the world’s largest professional network” and takes it away from the turbulent world of social media. As a brand that relies on people who trust the platform to build their careers with the right connections and legitimate opportunities, it’s smart for LinkedIn to differentiate itself from social media; a category plagued by echo chambers, data misuse and opaque practices.
A new license to innovate and expand
A well-defined category also allows companies to signal their future growth potential, especially to potential employees and investors. Defining yourself too narrowly binds you to a certain type of product or service, while defining yourself in line with a larger ‘need’ gives you a license to expand what you do.
Uber could have easily resorted to defining itself as a taxi service, but it never wanted to limit itself to moving people in cars. From the start, it communicated a greater ambition that made workers and investors jump on board: Uber exists to “reimagine the way the world moves for the better”. In short, it’s not about taxis, it’s about traffic. This ultimately gave Uber a credible platform to offer diverse services such as food delivery (Uber Eats), healthcare (Uber Health) and, more recently, travel, allowing customers to book long-haul journeys on planes, trains and buses through the app.
A way to connect with a wider customer base
Categories are also an important signal to customers; it helps them understand whether what a company delivers is relevant to them. With the emergence of more and more niche customer segments, it can be tempting to put all your eggs in one (customer) basket. But here lies the danger. You can close a category – often unintentionally – from parts of the population that would otherwise use what you offer.
Quorn started life as a food company targeting vegetarians and vegans; a group that represents about 10% of the population in the UK. Realizing that this was severely limiting its customer base, Quorn redefined itself as a “healthy food” company, famously partnering with openly carnivorous Mo Farah. After switching to targeting 70% of the population who describe itself as health-conscious, with the belief that its products are “for the good of all”, the company was able to achieve consistent double-digit growth. .
Categorization is no longer a black and white issue, but the gray nature of where companies play is a valuable opportunity; one that is too often overlooked. Brands need to be more strategic in how they define themselves, choose categories that amplify their stock stories, indicate the right levels of ambition and help grow their customer base. When it comes to defining your category, choose wisely.
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