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Terminus Blog

October 18, 2021

A Conversational Guide to Category Building

Category: FlipMyFunnel Post

In this open forum conversation, we break down the myth around category building — where most people get confused and how to better define the experience a company is building. 

Christopher Lochhead, Co-Creator of Category Pirates, Kevin Maney, Partner at Category Design Advisors, and Al Ramadan, Founder and Category Designer at Play Bigger, join the show to discuss category building in all its finer details.

Common category building mistakes

When you think of an mp3 player, what comes to mind? The first brand to ever make an mp3 player, or the ipod? A lot of people like to think that category creation begins with the first team to create it. Christopher disagrees. It’s not the first team to create it, it’s the first to tip at scale. 

”When enough of the world agrees with you about your point of view, then, POW, you get a new category and you get an emerging category queen or king.” — Christopher Lochhead

This is why it’s better to call it category design rather than category creation. 

Evangelising the problem over the solution 

For Al, the biggest point of confusion is blurring the line between refreshing a category and a brand. To be a category champ, you have to have 3 qualities that come together.

  • Product design
  • Company design
  • Category design

To do this, however, the brand needs to keep the problem in focus. Al shares an example of Qualtrics. When Qualtrics was asked what problem they solved for, they responded, “We solve for market research and we’re a survey company.” 

However, while market research and surveys were important parts of the solution — they weren’t the problem. The real problem: what kind of experience are companies delivering to their customers?  

When to use category design and when to avoid it

If your plan is to claim and dominate a category, there’s a roadblock a lot of companies run into: truly solving for a new problem and not trying to solve a problem better than a competitor. 

It’s a mistake to hold onto a category if you’re unable to differentiate yourself within it. Imagine an appliance company that wants to sell more dishwashers. They reach out and say, “This is our category; we want you to polish it up so we can dominate.” It won’t work this way. 

You have to find a problem that no one is solving yet. When that’s the goal, it might mean you have to change categories, your brand, and even your product. It may be the only way to define and dominate a category. Sticking to a category because it feels cemented into your brand is the wrong strategy. 

Riding on the coattails 

But what if you don’t want to dominate a category? A lot of companies find success with sales within a category. Using the appliance example above, that company may be able to sell more dishwashers than a competitor under the same category. But one thing to keep in mind — whoever dominates the category will take more revenue than anyone underneath them. 

But how much revenue does dominating a category really offer? According to research, the category champ takes approximately 76% of the total market cap. Beyond this, whoever dominates can increase scale and product.

”It allows you to repackage your product in the context of a much bigger category picture called the blueprint.” — Al Ramadan

Inviting analysts into the cycle

It’s time to get rid of the idea that analysts’ opinions only matter after the fact. Having more eyes on the design can help give you perspective you wouldn’t have otherwise. According to Christopher, sharing your early thinking with analysts is a great way to hone in on your category. 

“Most people have a little entrepreneur in them. And that’s true for analysts,” Christopher explains. 

Letting more people in early helps them get excited. If you’ve been working on a project for 6 months, you can’t expect someone who found out about the project today to have the same amount of enthusiasm as you. 

A Key Takeaway

Every company cannot be a category champ. Most companies will find success differentiating their brand or product. But, for those few who find a truly unique problem to solve for, they will continue to take the lion’s share of the profits. Knowing the risks and rewards will help position you to make the best decision for the future of your company.

This post is based on an episode of the #FlipMyFunnel podcast. Check us out on Apple Podcasts, Spotify, or here.

Listening on a desktop & can’t see the links? Just search for Flip My Funnel in your favorite podcast player.

Written by Sangram Vajre

Sangram Vajre is the co-founder and chief evangelist of Terminus, the leader of the account-based marketing (ABM) movement transforming B2B marketing. Before co-founding Terminus, Sangram led the marketing team at Pardot through its acquisition by ExactTarget and then to Salesforce. Sangram is the author of Account-Based Marketing for Dummies and is the mastermind behind #FlipMyFunnel. Follow Sangram on Twitter at @sangramvajre.

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