This article has been reposted from Philip’s personal blog with permission.
I’ve been thinking a lot about positioning for the last few weeks: positioning in the sense of where a product stands in relation to others offering similar products. In particular, I’ve been thinking about why some companies stand out in the market and others don’t.
In this blog post, I’ll attempt to summarise my best understanding of positioning. A lot of my views have been shaped by books like Positioning: The Battle for Your Mind, 22 Immutable Laws of Marketing and Play Bigger. If this topic interests you, then I’d highly recommend you check those books out.
I’ll be starting with the most controversial idea for some spice: It’s better to be different than it is to be better.
Most of us focus on how our product is better than competitors. This is usually a mistake. Instead of spending time and effort to become better, you should focus on being different. In order to understand why this is the case, you need to know a little about categories.
What are categories?
Categories are essentially groups of products focused on a particular problem. The problem is what defines a category. Some problem → category examples:
- I want to make a louder guitar → guitar amps
- I want to get takeout food without leaving the house → online food ordering
- I want to pay without getting my wallet out → mobile payments
- I want an energy boost, but I’m not thirsty → energy shots
When figuring out what to buy, we think in terms of categories first and then products. I need to haul things around on the farm so I should get a bakkie (category) and I think the Toyota Hilux (product) is the best bakkie.
Within each category we have a ranked ladder of products in our minds. For example, if you’re thinking of cloud infrastructure your ranked ladder is probably AWS, Azure, Google Cloud.
So how do these rankings get established? It’s mostly the order in which they enter the mind. The first product takes the number one spot, the second product takes the second spot and so forth. Now you might be thinking, is this guy really trying to convince me that the disproven idea of first to market was valid all along? No, I’m not! Many first-to-market products never make it to the number one spot because becoming a brand leader is not about being first in the market. It’s about being first in the mind.
Furthermore, it turns out that changing these rankings is pretty hard once they’re established. When it comes to products in a category the mind is fixed. That means new entrants in an existing category are at a big disadvantage because they start at the lowest rung. This leads us to the next idea.
If you ain’t first, you’re last
You might think that second or third place in a category is not so bad, but the world of categories is rife with inequality. The rewards of a category disproportionately go to the number one product - the category king. For example, Uber is the category king of ride-share in the US with 70% market share. Lyft comes in at a distant second place with 20% market share. This is typical of a category king in any industry - even those outside of tech.
Some examples of category kings:
- Uber is the king of ride-share (70% market share)
- All Gold is the king of tomato sauce (61.2% market share)
- Tesla is the king of electric vehicles (66% market share)
- Mrs Balls is the queen of chutney in South Africa (70% market share)
- AWS is the king of cloud infrastructure (32% market share)
With such a disproportionate upside to being first, you really should ask yourself why you’d aim for anything less. Your startup should be aiming to dominate a category and achieve all the glory that comes along with that. Working in a category where you can’t plausibly be first one day is a waste of time.
The problem of course is that categories are incredibly competitive and people don’t easily change their minds about rungs in a category. So how does a startup get to be number one?
If you can’t be first in a category, create a new category
It turns out that the mind is much more flexible with categories than it is within them. It takes a lot for us to change our minds about the ranking of products within a category, but we’re quite willing to add new categories if they’re presented in the right way.
The challenge with introducing a new category is convincing people of the problem that the category solves. Once people see the problem, they can’t unsee it. The job of a category creator is therefore to identify a problem and articulate that product in a compelling way.
When you launch a new product, the first question to ask yourself is not “How is this product better?” but rather “First what?“.
Everyone is interested in what’s new. Few people are interested in what’s better.
It’s also worth mentioning that it’s normal for mature categories to split. For example, laptop computers started as a single category but are now split into notebooks, ultraportables, desktop replacements, gaming laptops, etc.
It’s important to put thought into the category name because it shapes how people think about the category. Good category names describe the nature of the problem being solved. For B2B companies, the name should speak to the business function where the problem lives, e.g. “Customer Success Management Software”. Consumer companies need a category name that’s direct and descriptive like “social network” or “on-demand transportation”.
Market the category, not your product
If you’re first in a new category, promote the category. Your product won’t attract customers until people understand the problem that the new category solves. So, sell the problem! The eventual category king is often the company that best articulates the problem.
Dismissing a product is easy, but ignoring a well-articulated problem is hard.
For example, GoPro launched the action camera category with their "Be a HERO” campaign that convinced athletes that they need to film themselves. When these athletes decided to get an action camera they ended up buying the only sports camera on the market: GoPro.
To build a category you need a point of view
To build out a new category you need to believe in something that the rest of the world probably doesn’t yet believe in. Opportunities to create a new category often exist outside of available data and consensus. It requires a leap of faith, which is why category creators are almost always missionaries rather than mercenaries.
In Zero to One, Peter Thiel explains that when he interviews someone he always asks them the following question: “What important truth do very few people agree with you on?”
The most common answers are things like “_Our educational system is broken and urgently needs to be fixed” or “There is no God.” _These are bad answers because they are actually common beliefs. Thiel says that the best answer to this question takes the form of "Most people believe in x, but the truth is the opposite of x.” Your point of view should be like this: Strong, specific and unique.
Sidenote: If you’ve read Zero to One you might remember his criticism of the lean methodology. He describes it as “making small changes to things that already exist.” Category creation is the opposite of this. New categories are created by taking a big bet on a point of view, not through incremental iteration.
Building a category community
It’s scary to commit to your point of view and create a new category. Fortunately, if you articulate a real problem you won’t be alone for long. Sharing an opinionated point of view plants a flag for your cause which attracts other people. Some of them will be haters, but many of them will share your point of view. They’ll join your cause and become fierce allies.
Your allies can come in all shapes and sizes. They could be media, customers, service providers, influencers, investors and even competitors. As long as it’s building out the category, it’s helping you!
We experienced this first-hand when we launched OfferZen back in November 2015. At the time our platform wasn’t great, but we had done a good job explaining the problems of traditional recruitment and our vision of a tech talent marketplace. Almost immediately we found support from developers, CTOs, internal recruiters and executives. Mind you, we certainly had our fair share of haters too.
Long live the king
Once a category king has been established it’s very hard to knock them from the top spot. What usually dethrones category kings is not a new product in their category, but rather an entirely new category:
- Blockbuster was killed by a streaming service, not a better DVD rental store
- Siebel Systems was killed by a cloud-based CRM, not a better on-premise CRM
- Facebook is getting killed by TikTok, a short-form video social network
Keep in mind that not all new categories disrupt old ones. Airbnb created a new category of community-driven hospitality, but the hotel industry is doing just fine.
Steve Jobs was the mob boss of category creation
To end off this post we’re looking at one of the most successful category creators of all time: Steve Jobs. Here he is introducing the iPad back in 2010:
Notice how he starts by setting up the category and only once it’s clear why this category should exist does he show the audience the new product.
“iPad creates and defines an entirely new category of devices that will connect users with their apps and content in a much more intimate, intuitive and fun way than ever before” - Steve Jobs