The Category Creation Formula: Five Learnings for Insight Professionals

In recent years, category has become a hot topic in marketing. Much of this is thanks to the Ehrenberg-Bass Institute’s idea of Category Entry Points. Look no further than Mark Ritson, who recently described category as “mattering more to a company’s success than advertising, brand or even product”. 

However, most marketers knew one truth about categories. A brand that creates a new category is likely to do very well.

But creating a new category isn’t easy. That’s why Kevin Maney and Mike Damphousse wrote The Category Creation Formula: Discover, Design and Win New Market Categories (TCCF).

The book guides anyone who wants a category-winning strategy. It holds more useful lessons than I could fit into a whole series of articles. Here are five of its ideas that feel most relevant to insight professionals. Co-author Kevin Maney also kindly shared his thoughts on them with me. 

Finding a place in the category formula

TCCF states that the formula for creating a new category is: context + missing + innovation. Context is what has changed, or is changing, that you want to address. Missing is what doesn’t exist yet but could solve a problem that the shifting context creates. Innovation is the invention that fills the gap.

What this means for insight professionals

When we help clients build their formula, drawing out what they know matters as much as adding what we know. As Kevin explains:

“We believe that often clients know their industry, the business. They probably have done their own research. They have in their heads what we need to know. Our job is to get it out of them to help inform the context and missing parts of the formula.”

So, insight professionals working on category design should first make the most of what clients already know. Only then should they commission new research to fill the gaps in the formula.

Locating the line of the adjacent possible

The “adjacent possible” is the point where the technology to innovate exists and society is ready for it. When a new category meets these criteria, it has the chance to scale.

However, if the technology isn’t advanced enough, the innovation will fall into an existing category. And if society isn’t ready for the idea, people are unlikely to buy it.

What this means for insight professionals

We need to help clients find the hallowed ground of the adjacent possible. To do this, we must understand how society will react to an innovation.

But in doing so, we must not make clients slaves to the data. In Kevin’s words, “a lot of category design is a sense of emotions and gut feelings and understanding”.

This means insight professionals must walk a fine line. They need to balance what the evidence suggests with what clients’ guts tell them – even if this means going against what the data suggests.   

The innovation spectrum

TCCF argues that innovations sit on a spectrum. At one end are hierarchical innovations. These are complex products that companies must build in full before customers can buy them. They cost a lot and take a long time to build. 

At the other end are emergent innovations. Companies can build these in stages, and they give customers some benefits even when half-built. They need less money than hierarchical innovations, but they are easy to copy. 

Crucially, an innovation that is neither one nor the other is less likely to win a whole new category vs. one that does.

What this means for insight professionals

If an innovation sits between the two ends, that doesn’t mean it can’t succeed. But, in Kevin’s words, it’s important “for businesses to know what they’re doing and where they are”. 

This is where insight comes in. It can offer an outside view through competitive intelligence and cultural context. This matters because businesses can “only know where they are” if they know where their rivals and the wider culture are heading.

The not-so-secret life of categories

TCCF draws on the work of economist Paul Geroski. It shows how categories are born, grow and, in time, fade. Along the way, there are several key milestones. 

The first is a rise in the number of companies in a category. This matters because it shows a shared belief that the category has promise. Next, the category’s value begins to rise. This shows that buyers accept it. 

But perhaps the key moment in a category’s lifecycle is when a dominant design emerges. This is the design the category sees as the leader and starts to rally around. It happens when consumers signal that one design is best. After this, the category’s value is likely to keep rising, while the number of competitors falls.

What this means for insight professionals

As with the formula, Kevin feels that understanding a category’s lifecycle is about teaching clients and using what they already know. It’s less about creating new insight. As he puts it:

“You need to walk clients through the Geroski curve, and ensure they understand how it works, and then it’s about helping them apply their self-knowledge to this curve.” 

The importance of designing categories with emotion

We all know emotion matters in advertising. But TCCF shows it matters in category design too. 

That’s because a new category asks people to buy into something they’ve never bought before. They may buy it as well as, or instead of, another category.

Emotion matters because a new category must make people feel safe enough to enter it. Just as importantly, it must get them to buy in for emotional reasons. Research shows we’re less likely to reverse emotional decisions than rational ones.

What this means for insight professionals

The task is simple to describe but hard to do. We must help clients find the emotion their new category can use as a safety net. This means combining two worlds – Category Entry Points and behavioural science/consumer psychology. 

Category Entry Points provide the hook that gets people to think of the category when they’re ready to buy. Behavioural science/consumer psychology shows what makes people feel safe buying into a category for the first time. 

These five areas only scratch the surface of what insight professionals can learn from TCCF. I’d encourage anyone who wants to learn more about the world of category design and innovation to find out more about The Category Creation Formula: Discover, Design and Win New Market Categories here.