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You’re Not Competing In The Category You Think You Are! (How to Find Out)

Last week I wrote about my 7-step CatSight™ Process for Insight Development. The first step is to identify the Category in which you are competing. I got so many comments about this step that I decided to dedicate a whole post to this important topic.

If you haven’t yet had the chance to read last week’s post (“Customer Centricity is Today’s Business Disruptor, Insights its Foundation”) I suggest you do this first, as background to this post. In it, I summarised the very first step of Insight development like this:

C = Category

Whenever you want to develop insight, the first task is to decide on the category you want to study. This may seem obvious to you, but in many cases, it isn’t as clear as you might think.

Category identification by zooming inFor instance, suppose you are looking to launch a new juice flavoured soft drink. You may think that you are competing with other juices or perhaps other soft drinks.

In working with one client in just such a situation, we actually found that their main competitor was an energy drink!

The reason was that these are seen as being for lively, energetic, fun-loving people who needed a boost. Whether this comes from the caffeine of an energy drink, or from the added vitamins and minerals which was my client’s offer, didn’t seem to matter.
If we’d only looked at other fruit flavoured soft drinks we would have missed a whole – and large – section of category consumers.
By starting our comparison in all beverages and then slowly zooming in as we learnt more, we were quickly able to discover this perhaps surprising positioning for the new drink.

This shows the power of taking the consumers’ perspective, especially when segmenting a market. But more about that in a moment.

The above example is a great start. But many readers have since asked me to help them with their own category definition, so here are the suggested steps to doing it for yourself:

 

Step 1. What is the category definition you are currently using? 

In any process we need to start by identifying where we are today. In this case, it should be the category you think you are competing in. Depending on whether you are offering a product or service, you might define it as:

– All hot beverage consumers ….. or ….. users of an insurance service.

– Consumers of coffee ….. or ….. people who have bought insurance for natural disasters.

– All consumers of instant coffee powder ….. or ….. house owners in Florida who have bought insurance for natural disasters.

– Consumers of instant coffee powder costing less than US$ 2.50 per 100 gms ….. or ….. owners of houses over US$2 million in Florida who have bought insurance for natural disasters.

As you can see from these few examples, the bottom definitions are far more precise and focused than the top ones.

In any process we need to start by identifying where we are today. #Process #Business Click To Tweet
The one you use, will depend upon whether you are looking to grow your brand through your marketing activities or looking to develop a new product or service offer. I call this zooming in and zooming out. In general understanding the category by zooming in is best for growth, zooming out for innovation.

Now take a look at your own current category definition. I bet it’s too broad for general use isn’t it? This is the mistake that most businesses make, big and small. They want to attract all consumers or users of a category, but as is often quoted:

“If you try to please everyone, you end up pleasing no-one”

The more precise you are in the group of customers you are trying to attract, the more focused will be your actions and communications. In addition, they will also resonate more strongly with your target audience.

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Step 2. How is this category changing?

Once you have identified the precise category in which you are playing, you need to consider what is currently happening to it. Is it growing or declining? Why?

Understanding how the category is changing and more importantly why, will help you to understand it better. For instance:

- Is the category growing? If so is it the leading brands which are increasing, or are there new brands that were recently launched which are making the difference? Identfying which brands are growing and the reasons for this growth will enable you to take corrective action.

- Is the category stable? Are category shares stable, or are some brands gaining and others losing? Again, why? What do the brands which are gaining have in common? What are the losing brands lacking? Are the changes making a difference to the category definition?

- Is the category declining? Are all major brands in the category losing or are some gaining at the expense of others, but not maintaining overall category size? If so, What are the declining brands lacking? Where are customers who are leaving the category going to? Is there a new category which is better meeting their needs?

Your answers to these questions, will help you to understand whether the category in which you are currently competing is going to remain as attractive as it is today.

 

Step 3. How will this category change in the future?

In addition to current category trends, you also need to assess what is likely to happen in the marketplace in the coming years and how this may impact it.

Things are changing nd changing fast these days. There is no more "business as usual." Expecting the unexpected has become the norm, which is why I am such a big fan of scenario planning.

There is no more business as usual. Click To Tweet

Industries are being disrupted. A study from the John M. Olin School of Business (Washington University) estimates that 40% of today's Fortune 500 companies on the S&P 500 will no longer exist in 10 years time!

40% of today's Fortune 500 companies will no longer exist in 10 years time! #Business #Trends #Future Click To Tweet

Understanding who and what will impact your category, is the first step to preparing for the changes which could come. Preparing for likely future opportunities and risks is the second step, and the reason scenario planning is so vital to ongoing busines success.

 

Step 4. Which of the category users are you attracting?

This question surprises some people. They expect that once they have identified the category in which they are competing that they can just start trying to attract everyone in it. However "You can't please all the people all of the time" as the infamous quote from John Lydgate mentions.

You can please some of the people all of the time, you can please all of the people some of the time, but you can’t please all of the people all of the time. John Lydgate Click To Tweet

You therefore need to identify which of the category users would be most interested in what you have to offer. The best way is by running a segmentation study and then plotting the groups on the Boston Matrix I mentioned in last week's post. Or you can read "How to Sell Less to More People: The Essentials of Segmentation." for a more detailed explanation on how to divide all category users into relevant sub-groups.

Understanding which sub-group of all the category users you are most likely to appeal to with your offer, is one further step in focusing on the very best target audience for your brand.

Step 5. How are your customers changing?

After identifying which category users are the most attracted to your offer, you also need to consider how this sub-group is changing. Is it increasing or decreasing in size, and how and why is it changing.
 
As with category changes mentioned above, it is important that you target a viable group. This can either be a growing segment or you should have plans to attract those who switch out with a separate offer
There are many reasons why a segment may decline:
  • The introduction of a new category segment that is taking customers away from yours.
  • Natural decline because of aging.
  • Behavioural changes that make the category less relevant than in the past.
Having identified how your customers are changing today, you then need to consider societal trends and their impact on your customers. That is the ultimate test to choosing the right group of category users to target.
 

Conclusion

Going through these five steps will give you the very best understanding of the categroy in which you are competing, as well as the customers who make up the sub-segment you target.

Have you successfully mastered every suggested step? What have you forgotten?

Is there something I myself have forgotten or that you would add? If so, then please share your ideas in the comments below. Thanks

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The New Way to Innovate You Must Start Using Today!

When I get several requests in the same week on exactly the same topic, I know something is happening in the marketplace. This week was one such occasion.

A Pharma company wants a presentation on it; a CPG company asked me to give a half-day workshop about the topic; a conference requested a keynote speech about it; a major US business school wants a guest lecture covering the idea  and a consumer goods company wants an article for their newsletter. What’s the topic? The new ways to innovate, that’s what.

With all this interest, and despite having written some popular posts in the past on best-practice innovation, such as “ How to innovate more creatively”, “How to get R&D as excited about consumer innovation as you are”  and “Never succeed at innovation: 10 mistakes even great companies make”, I thought I would summarise the latest trends around how to innovate more successfully today. So here are some ideas to get you thinking about the changes you might want to bring to your own innovation processes.

Customers react to new innovation1. Start with the customer in mind – always

So many organisations still have an innovation process that starts with R&D or operations. It’s time to reverse your innovation funnel and start with the customer. (>>Tweet this<<) What are their problems with current products and services; what do they dream of having? How are they compensating or compromising?

 

If I had asked people what they wanted, they would have said faster horses” Henry Ford

“People don’t know what they want until you show it to them” Steve Jobs

However, as Henry Ford and Steve Jobs remind us, customers don’t usually know what they want. They are usually very clear about what they don’t like, but they also often know the solution they are looking for – even if they don’t express it as such. It is our job to interpret what they are saying into what they need. Therefore, identify the result they want but not how they want to achieve it, otherwise you will be looking for that “faster horse”!

2. Stage-gate innovation is essential for a successful business

Today’s world is fast paced and customers never stay satisfied for long. What surprises and delights today, is ordinary and normal, if not tomorrow, at best in a couple of weeks or months. That’s why it’s vital to work on new product and service developments even before you launch your latest offering.

NEW INNOVATION STAGE-GATESMany companies today work with generation pipelines, with three, four or five stages of innovation preparation. This ensures that they are already working on the replacement of each product they launch, whether or not it’s a success.

3. Line extensions can only do so much

Innovations risks opportunities

According to the McKinsey article “ Reinventing Innovation in CPG“, real growth comes from ground-breaking innovations, not simplistic renovations. However, line extensions do provide the time for organisations to prepare their true innovations, while responding to today’s customers incessant desire for novelty.

They are also easier to develop and launch, which means they are less dem anding on resources. Companies which are satisfied with only incremental innovations are unlikely to see significant growth in the long-term. For this reason successful br ands need to do both. (>>Tweet this<<)

4. Launch before you’re finished

Many tech companies use this approach, by involving customers as beta testers. In this way, they get their customers help – for free – to improve and mould the final offer. It also allows them to launch more quickly and gain the positive image associations of being first to market.

If you are concerned about confidentiality or competitive speed to respond, then work with customers through co-creation. (>>Tweet this<<) Involve them at every stage of the development process from ideation to launch preparation. If your management are  concerned about the risks of sharing innovative ideas outside the company, involve employees instead, perhaps from other divisions so they are less biassed.

5. Review the category in which you’re playing

Are you sure that your customers see your br and in the same light as you do? Many times I have heard a customer correct an interviewer in a research project, when asked about br ands in a category. “That br and isn’t in that segment, category A” they say; “It’s not a competitor of X, but of Y and Z, the main br ands in category B”. Some examples include dried soups which today compete with sauce mixes, carbonated soft drinks with fruit juices and body gels with shampoos.

Another advantage of underst anding the category in which your customers place your br and is that this can provide you with new ideas for expansion.

Mars ice creamMany confectionary br ands have moved into ice cream and desserts. They have understood that they are being seen as more of a “treat” than merely “just” a chocolate bar. When your customers choose between products from several different categories when deciding what to eat or buy, it is a clear indication that you are not (only) competing in the category you first thought you were. (>>Tweet this<<)

In conclusion, there are many reasons why innovations fail:

  • A short-term mindset where success is dem anded in weeks or months rather than years.
  • Top management instils a fear of failure, so no-one will defend ideas that are unpopular.
  • The innovation process itself is biassed towards current knowledge and skills.
  • A lack of deep customer underst anding.

These five ideas will help you to reinvent your innovation and also make it more customer-centric. After all isn’t that what all best practices should do today, involve the customer? If you have other – better? – ideas, then why not share them below?

Winning Customer Centricity BookThis post includes concepts  and images from Denyse’s book  Winning Customer Centricity. You can buy it in Hardback, Paperback or EBook format in the members area, where you will also find downloadable templates and usually a discount code too.

The book is also available on Amazon, Barnes and Noble, iBook and in all good bookstores. If you prefer an Audiobook version, or even integrated with Kindle using Amazon’s new Whispersync service, you’ll have to be patient just a little longer – but it’s coming soon!

 

 

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