In the first edition of The Market Engineer, I asked you to consider the following:
- Research shows (cited in the book, “Play Bigger” by my friend Christopher Lochhead and his cohorts) that the category leader generally secures 76% of all the profit in its respective category. Trying to enter an established category is fraught with peril because the category leader tends to define the rules and your company/product won’t likely survive. What do you think is the name and what are the attributes of your category? Why?
- Why do you believe you are the thought leader in your category? If you aren’t, why? What is your plan to become the thought leader in your category?
- What is your thought leadership strategy for the year and how will you measure success?
- Do you have a podcast? How many subscribers? Do you participate in other podcasts that have 1,000s of subscribers/listeners? If not, why?
- Who are the top 3 business podcasters who discuss topics related to your category and when was the last time you participated in their “podcast”?
- Do you have a blog? How many subscribers do you have? Do you participate in other blogs that have 1,000s of subscribers/readers? If not, why?
- What is your current overall website ranking vs. your top competitors?
- What are the top 5 keywords and keyword terms associated with your category? What is your ranking for these keywords vs your top competitors?
- What is the monthly number of people who use your company name as a search term? What has the trend been for the past year? Same question for each of your top competitors.
A category in the B2B world is simply a term that describes a business problem – e.g., Customer Relationship Management (CRM) or Business Intelligence (BI). In the consumer world, a category might be Cosmetics and a subcategory might be Lipstick.
I posited these questions because knowing the answers as they relate to your startup or product in a mature company is foundational to category design. And great category design is the first tenet of “market engineering”; the lack thereof, as the research for my book “Traversing the Traction Gap” showed, tends to kneecap many startups and new product launches.
The Stadium
I like to use sports as an analogy to explain categories and their importance. Pro sports teams need a place to play – e.g., a stadium. Startups and product teams also need a place to play – a category. This is where fans (customers/prospects) come to watch their teams (the companies) play. Each sport has its own rules (these are the attributes of a category) and team. In this metaphor, the teams are the brands/companies that participate in any given category.
Without a stadium to play in (a category), well-known rules of the game (attributes of the category), teams to play against (competitors – ironically, there must be multiple companies compelled to participate in your category), and fans (prospects/customers), no one will know where to come to watch you play (buy).
Research shows you have just two options re: category development: either create a new category and compel others to enter and compete or redefine an existing category with new attributes (rules).
New Category. The argument typically used against creating a new category is that it can take 12-18+ months to establish it and generate awareness and adoption by the industry and analysts. However, this process doesn’t require significant capital, just significant thought leadership work (e.g., books, keynotes, white papers, analyst briefings, customer education, etc.) with little immediate revenue to show for your efforts.
Existing Category. Establishing a new set of attributes for an existing category can take less time and lead to quicker revenue results. Marketo took this route. They considered creating a new category but elected to simply redefine the Marketing Automation category – a category that had been established years before but failed to take off due to inadequate product offerings. The downside is that if the market leaders have significant mindshare in an existing category that you choose to compete in, your new definition (attributes) may not be enough to overcome their dominance.
Unfortunately, most startups – and new products launched from mature companies – do not invest much, if any, time vis a vis category development and simply enter an existing category dominated by a market leader. The result? Like a new team just entering the NFL and playing against the Philadelphia Eagles: predictable annihilation.
Defining or Redefining a Category
Over the course of my career, I have been involved in creating or redefining several categories. For example, at Siebel Systems we created the Customer Relationship Management category (CRM) and at C3.aiwe created the Enterprise AI category. And as a venture capitalist, I have observed several of my portfolio companies define or redefine and then dominate categories.
The process of defining a new category or redefining an existing category is similar. Both require a significant amount of thought leadership – the second tenet in the “market engineering” process.
I have created a very well-defined set of processes that I use with my clients to help create their category and to install their company as the thought and category leaders. These processes typically include creating unique and authentic content that introduce new and provocative ideas and language via books, presentations, participating in existing podcasts with large audiences, etc. I explain a lot of this in my book which I wrote as a prescriptive guide. This is almost always a 12 month exercise and should precede the Demand Engineering process – which should be the second phase of your Go-To-Market strategy, not your first.
Many of my clients – before coming to me – began with expensive Demand Engineering (e.g., hiring expensive marketing and sales teams and using outbound tactics such as Google Adwords, marketing automated email campaigns, phone calls, etc.) resulting in significant capital expenditures with predictable limited results. Avoid this!
Tracking Your Category Success
To measure whether your company is succeeding in defining or redefining a category and considered to be the leader in it, you need to use search engine applications such as Google Search Console or SEMrush.
Use these basic tools to monitor the following metrics to judge whether your category and thought leadership tactics are paying off.
- The number of times your category was used as a direct search term
- The number of times your company was used as a direct search term
- The number of times your category and company were used as combined search terms
- The overall ranking of your website now, 3 months ago, 6 months ago
- The ranking of your website vs. your 3 top competitors
- The average time on site for your overall website
- The bounce rate for key landing pages (e.g., home page)
- The bounce rate for your overall website
You should generate a weekly report on these non-revenue metrics and follow their trend over time. These simple metrics will tell you if your category and thought leadership strategies (e.g., webinars, podcasts, white papers, bylined articles, etc.) are paying off. Your minimum objective is to secure at least Page One for organic searches related to your category; the key objective is to appear consistently in the first 3 responses on the page – even better is to win the Google Snippet.
Be sure that your website does not contain errors and warnings from Google. These will negatively affect your scores and ranking. A side benefit of this work is that high scores and rankings will reduce your Google Adwords pricing for both CPM and CPC campaigns when you are ready to begin the Demand Engineering phase.
As more companies begin to rotate into Gemini, ChatGPT and other LLMs to generate company and product awareness, there are some other strategies to put into motion but we will explore those in a future newsletter.