Airbnb, Chobani, Dollar Shave Club, Tesla … all are successful start-ups that have disrupted existing markets by creating – and owning – new subcategories; it’s the only way to grow says David Aaker.
Writing exclusively for WARC, Aaker, vice chairman of the Prophet consultancy and Professor Emeritus at the Haas School of Business, University of California, Berkeley, outlines the thinking that underpins his latest book, Owning Game-Changing Subcategories.
This is based on the assertion that the only way to grow (with rare exemptions) is to create, position and own new “must haves”, defined subcategories that change how a customer experiences the brand and/or creates a new brand relationship.
The insight that subcategories are the only way to grow began for Aaker with the observation that, in 35 years, the market share trajectory of Japanese beer brands changed in a meaningful way only four times, and all could be explained by the formation or repositioning of a subcategory like dry beer.
Aaker examined other categories – automobiles, computers, retailing, packaged goods and more – and the same conclusion kept emerging: “Sharp surges of sales were nearly always caused by the formation of a new subcategory.”
It is very rare, he reports, that a “My brand is better than your brand” strategy has led to a sales surge.
That being the case, businesses need to think about how they might discover or create a subcategory of their own. And while new subcategories are often associated with start-ups, traditional companies such as Procter & Gamble (Crest Whitestrips) and Asahi (Asahi Super Dry) have also carved out new growth opportunities through subcategories.
The first step is to identify or create “must haves” – properties of an offering or firm for which customers will have a high affinity. “The existence of a set of ‘must-haves’ (there are nearly always more than one) will create a basis for a core loyal customer group, the cornerstone of a growth platform,” Aaker advises.
As to where the ideas come from, there are a wide variety of sources – and some non-intuitive answers. “One observation is that most ideas are either offering-driven or customer/market-driven, but there are many variations beneath those headings.” (For more details, read Aaker’s article in full: Finding “must haves” that define game-changing subcategories.)
Aaker adds that there is a need to address the biases – rosy or gloomy picture bias for example – that can distort assessment of the potential of “must haves”. A degree of agility and tolerance for risk is necessary since procrastination and over-analysis can cause a rare opportunity to be lost.
Sourced from WARC