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An Inside Look at the Category Design: Josh Lowman
79 Plays4 years ago
Some companies aim to stand out from the crowd. They want to differentiate themselves from companies that walk, talk, and sound the same.
Some companies want to go a step further. They want to compete in a new category.
They embrace a concept called category design in which they define and lead a new market.
In this episode of Marketing Spark, Josh Lowman offers insight into the definition of category design and how one of his clients embraced the concept.
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Transcript
Entering Markets vs. Creating New Categories
00:00:05
Speaker
Hi, it's Mark Evans, and you're listening to Marketing Spark. Most entrepreneurs and companies move into existing markets. There are competitors doing the same things, but the entrepreneur believes they've built a better mousetrap. There's already proven demand for a product or service, so it's simply a matter of letting consumers know that there's a new option available. But what happens when you have a product in a market that doesn't exist, or perhaps
00:00:32
Speaker
you're moving into an entirely new space within a specific market. Well, you're not only trying to grow a business, but create a new category. And that's a huge challenge.
Introduction to Category Design and Josh Lohmann
00:00:43
Speaker
Today, I'm talking with Josh Lohmann, who heads up Goldfront, a category design studio that specializes in helping B2B startups define and lead new market categories. Welcome to Marketing Spark. Thank you, Mark. It's nice to be here.
00:00:58
Speaker
Why don't we start with a high level question? What is category design and who uses it? Why is it important these days? So category design is a discipline often used by startups, but could be used by other, many other kinds of companies to define and lead new market categories. And, um, that
00:01:28
Speaker
Idea of new market categories means that you're looking for an entirely new space to compete in and you're not competing in an existing category. And so there's a whole set of ideas and tools and a whole discipline built around that idea of how do we design a new market category for our company.
00:01:53
Speaker
One of the things that people may think about when it comes to category design is that it's just the latest buzzword. It's something new that consultants have rallied behind so that they can sell different kinds of services. Is category design a real thing? Obviously it is a real thing because you're making a living doing it, but does it work?
Category Design vs. Brand Strategy
00:02:13
Speaker
Yeah, so in the world of business, startups, marketing, there's always going to be the BS-ification of any discipline.
00:02:26
Speaker
anything that becomes valuable at all is going to also have a bunch of people who are saying they're doing it, but they're not really doing it, you know, and they're just trying to make a make a buck off of some new trend. Right. But no, category design actually is a real thing. It has real substance to it. In some ways, the you know, the precursor to it is brand strategy. And when
00:02:54
Speaker
Um, brand strategy was invented. There was a number of people who said, if we can define the central DNA of a company and its products, then our brand strategy could become the North star for everything that that company does. Right.
Preventing Incrementalism with Category Strategy
00:03:19
Speaker
The problem is that if you go into the startup world,
00:03:24
Speaker
chief product officers, people who run sales, people who run HR and the people department, they don't take brand strategy that seriously. The chief product officer is often not gonna look at a brand strategy as like, yes, I want this to be the North Star for our product roadmap.
00:03:47
Speaker
And so in a way, category strategy has come out of that problem that there is no unifying whole company strategy for companies who are really trying to go big and do something new.
00:04:04
Speaker
And so category strategy fills that gap. And so, yeah, you could do it in a way that where it's just kind of, it's not real and it's just kind of like something that marketing people say, but there's no meat to it. But when it's done right, you're doing it with the CEO, whoever runs product, the person who runs marketing, person who runs sales, all of those executives are agreeing to the central strategy.
00:04:31
Speaker
and then they're going to change what they do according to what that North Star is. And when you do that, it's really substantial. One of the things I think about when it comes to category design is that in theory, it sounds amazing. So for example, if you're a drift and you can actually create conversational marketing and own that category or at least emerge as the leading business because you've moved first,
00:04:57
Speaker
That is an awesome way to grow and build a business. But the one thing that I would say, I guess if I was the devil's advocate, is how hard is it to create a category, given that there's so much competition out there, companies are taking, like startups are so agile these days that you can start a business really easily. What is that alignment between concept and reality? And what are the challenges companies face when they try to create a category?
00:05:27
Speaker
Yeah, this is a question that I get all the time and it makes sense that it's like, hey, are we really a category creator? Like not everybody can be a category creator, right? But I look at it a different way. I, you know, we work with startups and late stage startups and companies that are tech companies that just IPO'd and people that are in that world and
00:05:53
Speaker
In my mind, those companies are all saying we have a really big idea that's going to turn into a very large
00:06:02
Speaker
market or a very large valuation for a company. They're going to investors saying, we've got a big idea. It's going to be really successful. That's why you're going to give us millions of dollars. And what category design does in a way is it keeps those people from backsliding into incrementalism, right? It's like you go into, you start the company and you go to get investors and you're like, we're going big. Then
00:06:28
Speaker
you get into actual the work of making the thing, the product and the marketing and the sales and you're like, well, actually it's just a better way to do something that already exists. And that doesn't lead to companies that have a high valuation or end up with really good outcomes for investors. So in a way category design is just, it's almost like something that just keeps founders and executive teams honest that they really wanted to go big in the first place.
Success in Category Design: Customer Perception
00:06:59
Speaker
So that I'm clear on category design.
00:07:04
Speaker
Is it, for example, a company looks at the CRM space and there's all these sort of generic CRM applications out there that serve all kinds of different companies. And they decide that they want to create a CRM specifically for B2B SaaS marketers, not for anybody else, but just for B2B SaaS marketers. And there's no other company that has that laser like focus. So they've decided to create this category within an existing category. Is that category design or is that incremental
00:07:34
Speaker
product design. I don't know if the B2B SaaS CRM is specific enough to be a category because CRMs now are used for marketing, sales, customer success, all kinds of things. The question you're asking the answer is yes. This all takes place in the mind of the customer.
00:08:01
Speaker
If you can get your customer having the idea that, oh, this isn't just an incremental improvement on something that already exists, but they're like, oh, this is a whole new way of doing things. This is actually going to transform the work that I do.
00:08:21
Speaker
That's when they're thinking, this is a new category. So if you can get that to tip in their mind, and it could be really specific. I mean, one thing we've talked about is like, hey, is Southwest Airlines a new category? You might say, well, no, it's not. It's just like a budget airline.
00:08:40
Speaker
But maybe in the minds of their customers, they think of it as something totally different because there's so many ways that Southwest Airlines is really unique. And so it gets a little bit philosophical here about like, well, what is a category in the mind of the customer? But that's really the question is, can you get the customer thinking, okay, this is a whole new way of doing things that is not in a category that already exists?
00:09:10
Speaker
It leads to two questions. One is who should consider category design? And number two is how do you get started? What are the first steps you should take? Yeah. So every funded startup should be doing category design and category design could be as simple as I have an idea and then I look at it through the lens of category. I, I have an idea for a startup.
00:09:38
Speaker
Is that a new category? I have an idea for a product.
00:09:42
Speaker
Is that going to be a new category? You know, that could be the, that's the simplest version of category design is that you're always looking at everything that you're doing through the lens of, Hey, could this be a new category? And if the answer is no, what would I have to change about that idea in order to get it into that, into, into the space of being a new category.
Strategies for Standing Out: Uniqueness in Category Design
00:10:01
Speaker
So you could do any kind of category, you could do category design in a very lightweight way like that. People hire us to do a much larger engagement.
00:10:10
Speaker
And they're often already at the point where they sort of found product market fit, but they really want to make sure that they stand out. And that's a much bigger thing where we're doing a three month strategy engagement and doing a deep dive on their business and helping them figure out what's really unique about what they do and how that thing that's unique can be honed and worked on
00:10:40
Speaker
and made clear that this is a categorical difference, not an incremental difference out in the marketplace. That's interesting because I do a lot of positioning work with B2B SaaS companies trying to identify how they're unique or different so that they can stand apart from the dozens if not hundreds of competitors out there who talk and walk the exact same way. But what's the connection between traditional positioning and category design? Do they flow one into the other?
00:11:09
Speaker
Yeah, they're really close. In a way, you could say category creation is a kind of positioning, right? When you come out and say we've invented something entirely new and we've given it a name, that is your positioning. The difference though is that positioning, there's two big things. One is positioning tends to also often include what's your position within an existing category.
00:11:39
Speaker
And category design says, no, you can't do that. You have to come up with a new category. That road is closed to you. That's one thing. The other thing is that positioning is seen as a brand or marketing strategy. So it can be hard to go talk to the chief product officer and say, hey, this is our positioning now. You need to go change your product roadmap based on this positioning.
00:12:03
Speaker
Whereas you sit in a room with the CEO, CMO, chief product officer and the rest of the executives and you go, we're creating this category. When it works, it's because everybody's bought into this single idea and then the chief product officer is going to change their product roadmap according to what that category is that you're creating.
Initial Steps in Category Design: Identifying Problems and Vision
00:12:23
Speaker
so that when marketing and sales are going out to tell the story, they're not just telling some BS. It's not just like a story they're telling. Product is coming right behind with really great proof points.
00:12:37
Speaker
So I've created the better mousetrap. I've found some customers. I've proven that there's demand for this product and people are willing to pay for it. And now I start to think, wouldn't it be great if I could create a category that I could own, I could move into and really be the pioneer and the evangelist? What are the steps that I need to take? Where do I start in terms of launching this process? Yeah.
00:13:02
Speaker
You know, some of it depends on where you are in the process. But let's say you already do have customers and you have a sense of the domain that you're working in. Maybe you're in an existing category. Maybe you're in an emerging category. You have a sense of where you play and you have some customers.
00:13:19
Speaker
what I would do and let's say you didn't, you didn't hire us at all. You just were going to sit down and try to do it yourself. You're going to start with trying to understand and really well what problems you uniquely solve, write it down, get every single thing down in a list. What problems do we uniquely solve?
00:13:41
Speaker
And there will be different things on there. There'll be some problems that we uniquely solve, but they're not that valuable to the customer. There'll be some things that are really valuable to the customer, but that other people can do. You're looking for those things that do both of those. We're unique in it, and these are really valuable to the customer. Then you're thinking, can I look at this entire list and come up with a single overarching idea for what we call the gap?
00:14:11
Speaker
And the gap is just a concept of what is that high level problem that we're really solving for the customer and you name that gap. And you've got to kind of be both true to today and forward looking. When you name that gap and you come up with what is that gap that we really saw for the customer, has to be like, yeah, this is true today, but we could make it much more true in the future.
00:14:39
Speaker
You've got that gap. For example, we wrote the category strategy for Qualtrics. Their gap was the experience gap. The experience gap is a difference between the experience that you think your customers are having and the experience they're actually having. A gap is different from just problems that you solve because
00:15:02
Speaker
It's much bigger. It's a much bigger, more strategic business problem than just, hey, we do surveys, we do real-time surveys. It's a big problem that if you can get it right, your customers will hear that and go, oh yeah, yeah, that would be really valuable if somebody could solve that for me. So that's the gap. Next thing is you're gonna look at your vision for the next three to five years.
00:15:31
Speaker
So you could write down in three to five years, how will things be different for our customer if we are ultimately successful? So in Uber's case, which is another client of ours, they might say, we're going to take 50% of the cars off the road in cities because people won't need to buy cars so much. They won't need to own cars so much.
00:15:54
Speaker
So there's going to be less cars. Like that's a really cool vision statement. Now that's not just a single vision statement. You're going to need a number of these were like, Hey, in the world that we're building, this will happen and this will occur and this will happen. So that's your vision. And then there's one more step in the process, which is your category idea. So if you look at the gap and you look at your vision statements, like what will we make happen if we're ultimately successful? The question is what category?
00:16:23
Speaker
are we inventing to get our customers from that gap state to that vision state? And you'll come up with a category idea through writing down some names of categories. So for Qualtrics, it was experience management or experience management platform, right?
Refining and Launching a New Category
00:16:44
Speaker
You'll write different ideas down for the name of the category. And then maybe a sentence or two that says what each of those names means to you. And you kind of just have to play with all these ideas. Well, what if the gap was this? Well, maybe that would change our vision to this.
00:17:04
Speaker
well, maybe that would change our category idea to this. And you're sort of triangulating these three things until you get something that really feels right. And you've got to look at it as like, can this be pretty much right today, but could we make it really, really right tomorrow? So there's a lot of, it kind of ends and outs to this where you've got your three ideas that you're triangulating. Then you're looking at, can we make a real case that this is true today? But are we also building
00:17:34
Speaker
a big space for us to grow into this tomorrow. And that's kind of a crux, that's kind of the essence of the process of category strategy.
00:17:46
Speaker
in about two minutes or less. It sounds like a combination of subjective and objective or art and science. Yeah, absolutely. And the question I would have is, once you've gone through the process, once you've got your product, you've got customers, you decide that category design is something that you want to embrace, and you go through this process, you come out the other end with experience management or whatever category name that you've developed,
00:18:14
Speaker
What comes next? What do you do with it? What are the next steps in terms of using it for marketing, sales, customer service, all the things that are part of your operational pillars? Ideally, I know a lot of your audience are in the marketing world. One of the cool things about category strategy is if you're a CMO and you bring or you're working in marketing and you bring category strategy into your company,
00:18:39
Speaker
Now the strategy that you're doing, it's no longer brand strategy and something that maybe the people that run product are gonna ignore. Now you're bringing in a strategy that it's like, okay, CMO, CEO, chief product officer, all working together to form this thing that everybody can agree to. And so that's very, very powerful and it's fun for marketing to be part of that.
00:19:03
Speaker
The next thing is, okay, if we're all in agreement on this is the category and this is our story and this is the rationale for why we think we've got the business case to go forward on this, then you need to do a category launch. And a launch happens in two places, inside the company and outside the company. And the first most important place is it happens inside the company.
00:19:27
Speaker
So that usually is a presentation by the CEO to everyone in the company saying something like, today we're changing the trajectory of our company. We're no longer gonna be lumped in to this category doing something incremental. We're now category creators. And here's the category that we're creating.
00:19:55
Speaker
During strategy, we write something called a category POV that basically the CEO will take the whole company through this category POV, through the gap, through the vision, through the category idea, and how much promise there is for this category in the future. Once you kind of have everybody on board and you're letting different departments know what they can do to help manifest the category, right?
00:20:24
Speaker
People doing recruiting are now gonna be using the category idea as part of their talking points. Sales is totally gonna change their pitch so that the category ideas especially is at the beginning of their pitch. Product is gonna change your product roadmap. Every department has a certain set of things that they'll do to go manifest the category. And then on the outside of the company going public,
00:20:53
Speaker
there's something that we call a category launch that will happen usually three to five months down the road after we create the strategy.
00:21:03
Speaker
And that's often for B2B companies. It'll be often a conference. The CEO may do a category vision presentation at a conference and there might be a number of other things that are done all at the same time so that you can really get your message, your new category message out to your audience with a lot of density.
Competitive Advantages of New Categories
00:21:26
Speaker
You get the whole company pulling together on the internal launch. You get the whole company pulling together on the
00:21:32
Speaker
external launch and good things will follow. So if you've established a new and exciting category,
00:21:42
Speaker
How much of a competitive advantage have you created? Is it the ultimate tool in terms of outflanking companies that may do something similar but you've decided to stand apart and not only compete in the same marketplace but be very distinct in terms of where you compete. If you can pull it off, it sounds like a great way to basically own a market.
00:22:04
Speaker
Yeah, I mean it can be a very, very successful thing to do. That said, we're dealing with people's minds and we're dealing with the mind of the customer and that is always mysterious and there is always the unknown to deal with when you're dealing with, will people think this is really valuable or not?
00:22:28
Speaker
But within that space of, hey, this is unknown. We don't know for sure how this is going to go. Category design is sort of one of your first best things that you could do to create and win a new category. So for example, there's a number of reasons why. So first of all, if you're a startup,
00:22:51
Speaker
People, customers tend to give more credibility if you say, we've created something entirely new. If you go to a startup's webpage and they say, hey, we're doing this thing, but we made it faster or easier or better, like, hey, it's the thing you already know, but we made it faster or easier. People don't really give a lot of credibility to that and they sort of zone out on messages like that. Whereas if you say, we've created something entirely different and if,
00:23:21
Speaker
you know, you have a podcast. If I said, well, we're going to change the podcasting game with this new category of podcast product that we've invented, you at least would give me three minutes to find out whether that's BS or whether there's something really true about that because it might change your entire industry.
00:23:41
Speaker
And so there's a weird way that by going big with our message and category, we're making it so that people are much more likely to listen to that message. So that's on the kind of almost the hook side of messaging, right? You got to hook your customers in order to get them interested and get a little bit of time with them.
00:24:02
Speaker
And then if we look at things on the valuation side, all up and down the spectrum of the valuation of a company from investors to customers to everything to recruiting, people value category creators and category leaders much more highly than they do.
00:24:22
Speaker
to me too companies. So for Qualtrics, for example, they were lumped in with surveys when we first started writing category strategy for them. And they were valued a little bit under a billion dollars. Now, five years later, they're the leader of experience management and they're valued at like $25 billion.
00:24:48
Speaker
So there's a whole valuation piece to this that works really well also. I did want to follow up with you in terms of looking at Qualtrics. I'm interested in really walking me through that category design process with a company that obviously is doing very well. I mean, a billion dollar valuation is nothing to sneeze at. Why did they come to you? What were some of the challenges that they were facing and why did they think that category design was
00:25:14
Speaker
was a way that they could jumpstart the growth of their company and obviously jumpstart their valuation. Walk me through that whole journey with them.
Case Study: Qualtrics and Experience Management
00:25:23
Speaker
Well, we were brought into that project by my friend Al Ramadan who has an agency called Play Bigger. They brought us into that process and we worked with
00:25:37
Speaker
Al and David played bigger to write the category strategy. And from the briefing documents that they gave us, it was clear that Ryan, the CEO at Qualtrics and the executive team had a very ambitious idea of what the product would be in the future. And they had already done a ton of work on that. And so they already had this idea that their product was much more than surveys.
00:26:07
Speaker
And so the thing that they didn't have was, okay, what's the name of that category? What's the story of that category? What's the gap? What's the vision? All of that. So the process was fairly straightforward of taking founders who had a really ambitious, clear idea for what they were creating and then figuring out like, how do we tell the story of that?
00:26:33
Speaker
And that all fell into line pretty quickly. I think on the first draft of the category POV, we did. It was like, hey, this is really working. We just need to make a few changes and we're good to go.
00:26:45
Speaker
There's a few other things that we did. We created a set of visuals that showed the category idea working in advertising and kind of customer facing creative that worked out really, really well and kind of vetted that, yes, this could be the new category. And then from there Qualtrics created a launch event
00:27:13
Speaker
And Ryan came out and sort of had his Steve Jobs moment, where he took the category POV and presented it to press and fortune 100 companies. And, you know, it was kind of like, wow, this is a heat that, you know, is really well received and very successful because people were like, oh, wow, this is exactly what we need. We don't really need more surveys. We need experience management.
00:27:40
Speaker
I guess in that case, you knew right away or fairly quickly how well that category design project would resonate.
Research Approaches in Category Design
00:27:51
Speaker
But in other situations where you're not getting that immediate feedback, how long does it take you to know whether what you've done is actually worked?
00:27:59
Speaker
whether that category design processes has done what you wanted it to do because does it happen? Does it usually happen right away or does it sometimes need time to nurture and sort of permeate through the community?
00:28:12
Speaker
Yeah, there's a number of variables there. And there's a couple of things I want to call out. One is you can design the category, the Steve Jobs way, which is like, hey, we're not going to do research. We're not going to go ask our customers. We know what's best. We're going to create something entirely new that we know is awesome. We're going to release it to the world. And hopefully people think the same thing that we think about this. And that's absolutely a way that some of our clients work and that we'll work with our clients.
00:28:39
Speaker
where if you can get it into a category pov if you can write the steve jobs like presentation of this new category and you feel it in your gut and you like i love this and you give it to your number one investor and they're like i love this too.
00:28:57
Speaker
you have a pretty good chance that's going to go over really well. However, we have some clients who are like, we really need to vet this and make sure this is going to work before we ever go out in public. And so we have something called category advisory community, which is a way that we do research with customers on an ongoing basis while we're doing category design. So while we're doing the strategy, we can check back in with customers
00:29:27
Speaker
take their pulse, is this working for you? Are you as excited about it as we are? And then build back any kind of insights that we've gotten, build that back into the category that we're creating. That's one thing. And then the other thing I want to say is you were basically asking like, okay, does it take a while? Does it happen? You know, what is that all about? Obviously, because we're dealing with the mind of the customer, there's an aspect of this that is completely mysterious and we don't know how it's going to go.
00:29:57
Speaker
That said, within that context, each client that we have that is trying to launch their category publicly has a different capacity for how well they're going to do that. How well do we all work together as a company to launch this thing? How coordinated are our efforts?
00:30:19
Speaker
How in sync is marketing and product? How much does sales really have its decks and its pitch together for the category launch? All that has to do with crazy social dynamics that has to do with how companies really work together and people work together.
Common Pitfalls in Category Design
00:30:38
Speaker
and we have a few ideas for how to keep companies on the right track but there's a certain amount of people, every group, every organization is different and that's a big variable in all of this. So what happens if it doesn't work? What happens if after all this work, all this creative process, the back and forth, the alignment internally that go to launch a new category and it falls flat in its face? Have you ever run into that situation and what do you do?
00:31:09
Speaker
You know, actually we haven't. We do have clients who they launched their category recently enough so that we're still waiting to see what happens. But really the version of failure that we've seen is
00:31:26
Speaker
There's a couple times where we've had clients who they thought they were hiring us to do marketing strategy to just do the story that they would be telling and they never fully got their product and the rest of the rest of the company on board with it.
00:31:46
Speaker
And in that case, it just becomes some stuff we said on our website. It just doesn't really take off because customers can see that it's flimsy. It's just kind of just something you're saying. It doesn't have substance to it.
00:31:59
Speaker
So unless you get all hands on board, everybody's reading off the same page, it's not going to work. Thanks for all the great insight about category design.
Conclusion and Contact Information
00:32:06
Speaker
Josh, where can people learn more about you and Goldfront? Come on over to goldfront.com. Also, we just launched our own podcast and newsletter. It's called category first.
00:32:17
Speaker
Well, thanks for listening to another episode of Marketing Spark. If you enjoyed the conversation, please leave a review, subscribe via iTunes, Spotify, or your favorite podcast app and share via social media. To learn more about how I help B2B SaaS companies as a fractional CMO, strategic advisor and coach, send an email to mark at marketingspark.co or connect with me on LinkedIn. I'll talk to you soon.