Many of you know my 7-step CatSight™ Process for Insight Development. The first step is to identify the category in which you are competing. I get so many questions about this step that I decided to dedicate a whole post to this important topic.
But before I start, I suggest you first read the post (“Customer Centricity is Today’s Business Disruptor, Insights its Foundation”) as background. You will also find the description of the seven steps of the CATSIGHT™ process included. In the article, I summarise the very first step of Insight development, that of category definition, 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.
For instance, suppose you are planning on launching a new fruit-flavoured soft drink. You may think that you are competing with other juices or perhaps other soft drinks. But rather than just assuming the category in which you are competing, I highly recommend that you check; you may be very surprised.
In working with one client in just such a situation, we actually found that their main competitor was an energy drink!
This shows the power of taking the consumers’ perspective, especially when segmenting a market. But more about that in a moment.
Step 1. What is the category definition you are currently using?
In any process, we should always start by identifying where we are today. In the case of your category definition, it should be the one you think you are competing in at the moment. Depending upon whether you are offering a product or service, you might define it as:
All hot beverage consumers …….. or …….. users of a particular insurance service.
All 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.
All consumers of instant coffee powder costing less than US$ 2.50 per 100 gms …….. or …….. owners of houses valued over US$2 million in Florida who have bought insurance for natural disasters.
As you can see from just these four examples, the bottom definitions are far more focused than the top ones. Hopefully you can appreciate why targeting such precise groups of customers is more likely to meet with greater success, than the wider, less specific first groups mentioned.
The Zoom tool you decide to use (in or out), will depend upon whether you are looking to grow your brand through your marketing activities or planning to develop a new product or service offer.
I call this zooming in and zooming out of the category. In general, understanding the category by zooming in is best for growth and precise targeting, whereas zooming out provides more opportunities for considering innovative new products and services.
Now take a look at your own current category definition. I bet it’s too broad for successful use isn’t it? This is the mistake that most businesses make, big and small. They want to attract the largest number of 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 defining the group of customers you are trying to attract, the more focused will be your actions and communications, and the more successful you will be. In addition, the tactics and strategies you use are more likely to resonate with your target audience.
Step 2. How is this category changing?
Once you have identified the precise category in which you are playing, you next consider what is currently happening to it. Is it stable, growing or declining? And why?
Understanding how the category is changing and more importantly why, will help you to understand it better and will allow you to evaluate its attractiveness more precisely. 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 explain the growth? Identifying 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? If so, how? Should you be targeting this one instead?
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 and changing fast these days. There is no more “business as usual” especially since the covid pandemic. Expecting the unexpected has become the norm, which is why I am such a big fan of scenario planning.
Industries are being disrupted and companies starting up and closing down at an ever-accelerating speed. According to a 2016 IMD article
“A recent study by McKinsey found that the average life-span of companies listed in Standard & Poor’s 500 was 61 years in 1958. Today, it is less than 18 years. McKinsey believes that, in 2027, 75% of the companies currently quoted on the S&P 500 will have disappeared.”
Of course, these numbers are likely to have changed significantly thanks to covid-19 and most certainly not for the better in most industries!
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 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.”
You, therefore, need to identify which of the category users would be most interested in what you have to offer. One of the many tools I use with my clients to help them identify the best segment for their brand, is the attractiveness and ability to win matrix, sometimes referred to as the BCG Matrix.
You can find out more about it in the article “How to Sell Less to More People: The Essentials of Segmentation.” The post provides a detailed explanation of how to divide all category users into relevant sub-groups, which you can then plug into the BCG Matrix.
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?
- The introduction of a new category segment that is taking customers away from yours.
- Natural decline because of customers’ ageing.
- Behavioural changes that make the category less relevant than in the past.
Going through these five steps will give you the very best understanding of the category in which you are competing, as well as the customers who make up the sub-segment you decide to 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