Should You Create a New Product Category? Decide It Last

The category decision that comes too early

A founder with a product that really is different often feels stuck. Every existing label seems too small. Calling it a CRM, an analytics tool, a scheduling system, each one undersells what it does. So the team invents a name for a new category and builds the pitch around it.

April Dunford, who does positioning work with technology companies, has seen this go wrong many times. She describes teams that spent years trying to position inside a category of their own creation while sales slowed to a trickle. When she worked through their positioning, the cause was plain. The category never fit what they sold, and it left prospects confused. They had made the category decision first, "based on nothing more than gut feel and hope."

What a category is for

Dunford's argument starts with what a category actually does. It sets context. She compares it to the opening scene of a movie, which tells you where you are and who these people are before the details start to matter.

Name a category and buyers fill in the rest. Say you sell a CRM. A buyer assumes you compete with Salesforce, that you cover basic account and deal tracking, that the sales team uses it, and that it costs no more than the leader. If those assumptions are true, the category saves sales and marketing a lot of work. Nobody asks whether you track deals.

If they are false, the category works against you. Dunford's example is a CRM built for marketing teams that have no sales team at all. Every assumption the buyer brings is wrong, and your team spends the start of each conversation undoing them. Dunford suggests a label like marketing automation might fit that product better.

So the job of a category is narrow. It points a prospect who knows little about you toward your differentiated value, and away from things you do not deliver. It does not replace your messaging. It does not answer why a buyer should pick you over the alternatives.

Why new categories are rarer than they feel

Some companies believe they can only succeed by creating a new category. Dunford says the record does not support that. Google search, Facebook, the iPhone, and Salesforce all began in underserved subsegments of existing categories, and grew until they displaced the incumbent. In her own client work, about 10% end up best positioned in a new category, because no existing one puts their value in context.

That leaves most products better off in an existing category, aimed at the part of it the leaders serve poorly.

Decide it last

Dunford's practical answer is an order of work. The category comes after the pieces that tell you whether a category fits.

1. List the competitive alternatives. What would your customers do if you did not exist?
2. List the capabilities you have that those alternatives lack.
3. Turn those capabilities into differentiated value, the value only you deliver.
4. Define your best-fit customers, the ones who care most about that value.
5. Then choose the category that points those customers toward that value.

The fifth step is where the new-versus-existing question gets answered. With the first four in hand, a category can be tested against something real. Does it set off assumptions that are true for your best-fit buyers? Does it point them at the value only you deliver? If an existing category does that, use it. If none does, you have a reason to create one, and you know what to anchor it on.

Without the first four, there is no way to judge a category at all. The choice rests on how the product feels to the people who built it.