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Your Category Is No Longer Black and White: The Power of Defining Where You Play

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Milan Kendall-Shah, senior strategist at Wolff Olins, explores the importance of category definition

Your Category Is No Longer Black and White: The Power of Defining Where You Play

Modern brands span all kinds of different products and services. Apple, which operates in scores of 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 grocery store business. Just recently, Home Depot and PlayStation have entered the financial services space.

But while brands invest lots of time and effort in understanding their purpose, defining their values, designing visual identities and pinpointing target audiences, very few companies stop to contemplate a much more basic question: which category are we in? 

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.

 

A favourable 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 diverse 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 its 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 itself as ‘the world’s largest professional network,’ distancing it 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 itself apart from social media; a category that’s become plagued with echo chambers, data misuse and opaque practices. 

 

A new licence to innovate and expand

A well-defined category also enables companies to signal their future growth potential, 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 itself as a taxi service, but it never wanted to limit itself to moving people around in cars. From the start, it communicated a 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, allowing customers to book long-distance journeys on planes, trains and buses through its app.

 

A way to connect with a wider customer base 

Categories are also an important signal for customers; it helps them to understand whether 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 targeting vegetarians and vegans; a group which, in the UK, represents around 10% of the population. Realising that this severely limited its customer base, Quorn redefined itself as a ‘healthy food’ company, famously partnering with openly meat-eating Mo Farah. After switching to targeting 70% of the population who define themselves as health-conscious, with a belief its products are “for the good of everyone”,  the company was able to achieve consistent double-digit growth.

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. Brands need to be more strategic in how they define themselves, choosing categories that reinforce their equity stories, signal the right levels of ambition and help to expand their customer bases. When it comes to defining your category: choose wisely.

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Wolff Olins UK, Mon, 08 Aug 2022 11:11:24 GMT