Five signs you're competing in the wrong category

For decades in Britain, people visiting someone in the hospital would often bring a bottle of Lucozade. It was a glucose drink created in Newcastle in 1927, sold mainly in pharmacies and given to sick children. In the 1960s and '70s the slogan was “Lucozade aids recovery.” The way it presented itself, it was a drink for sick people.

The product had nothing wrong with it. It was stuck in a small box: convalescence. And companies selling inside the wrong box rarely notice by looking at the product, because the product is fine. They notice through stranger signs, which at first look like sales or communication problems. We counted five.

Does price always come up first?

You hear the first sign in negotiations. The customer asks for the price before asking anything else, and the conversation stays there until the end.

It doesn't mean the customer is stingy. It means they've already put you in a box where the alternatives look the same, and when the alternatives are the same the only thing left to compare is the number at the bottom of the quote. Lowering your price at that moment confirms what they think: you're one of many, and the cheapest too.

As we read it, price as the first topic is a symptom, not the disease. The useful question isn't “how far do I need to drop?” but “who are they comparing me with, and why do they think we're the same?”

Do customers compare you with companies that aren't like you?

The second sign is subtler. You hear “but the other company does the same thing for less,” and “the other company” works differently, for different customers, with different results. You see the difference; the customer doesn't.

It happens when the category the customer is searching in is wider than the one you actually work in. Until the 1980s Lucozade was sold mainly in pharmacies: as we read it, it was being compared with the things you take when you're ill. In 1983 the brand was relaunched as an energy and sports drink, precisely to shake off its association with illness. A plastic bottle replaced the glass one and a new slogan arrived, “Lucozade replaces lost energy.” The first new flavors, orange and lemon, followed in 1986. The first face of the ads was Daley Thompson, Olympic decathlon champion. Between 1984 and 1989 UK sales tripled, to almost £75 million.

The name had stayed the same. What had changed was its neighbor on the shelf, and with it the comparison.

Does your best work earn compliments but no inquiries?

Third sign: you publish a successful project, a client case, a new product. Comments come in, pats on the back, “beautiful.” Then nothing. Nobody calls asking for the same thing.

It's an easy sign to misread, because it looks like success. We read it differently: if the work is liked but doesn't create a need, the people looking at it don't recognize a problem of their own in what you solved. They admire it the way you admire something well made for someone else.

Procter & Gamble found this out with Febreze. The spray, which could remove odors from fabrics, went into test markets in March 1996 and sold poorly. In The Power of Habit, Charles Duhigg explains why: people who live in a house that smells, with nine cats for example, stop noticing the smell. That's why nobody used Febreze: customers no longer sensed the problem the product solved. The line that sums up the case, in Duhigg's account, is this one: “No one craves scentlessness.”

P&G changed boxes. In Duhigg's telling, the new ads showed freshly made beds and freshly washed clothes: Febreze stopped being the cure for bad smells and became the scent you spray as a finishing touch, when things are already clean. In 2010 the brand passed $1 billion in revenue worldwide.

Do you explain what you do better than why to choose you?

Fourth sign: when someone asks what you do, you answer in ten seconds. When they ask why they should choose you, you start a list: quality, experience, customer care, reliability. Those are the same words your competitor would use.

When “why you” takes a list, it usually means there's no reason inside the current box that belongs only to you. The work we describe in our guide to Category Design starts right here: finding the customer problem nobody is naming, and building the box around it.

The story of light beer in the United States shows the difference well. In December 1966 the Rheingold brewery in New York launched Gablinger's, a beer with a third fewer calories. Meister Brau Lite followed in May 1967, in Chicago. According to Wikipedia's account, the first light beer makers went after health-conscious customers, many of them women, who drank little beer. Also according to Wikipedia, before Miller Lite light beer sales in the United States were negligible.

In 1972 Miller bought the Lite brand. It had noticed that Meister Brau Lite sold well in Anderson, Indiana, even among workers who drank a lot, and decided to aim at people who drink plenty of beer. It spent more than a year testing 30 recipes, put the beer on sale in four cities in 1973, and in 1975 took it nationwide with a major advertising campaign. The promise was now enjoyment: good and less heavy, “Tastes great, less filling,” as the campaign that stayed with the beer for years put it. The ads featured former athletes such as Ray Nitschke, Ben Davidson and Bubba Smith. By 2002 light beer accounted for 44% of the American market.

Is your marketing working harder and harder for less and less?

Fifth sign, and the most expensive. Every year you need more budget for the same leads, more discounts to close the same contracts, more content to get noticed. The numbers don't collapse: they wear down slowly.

It's the sign most often treated with the wrong medicine, namely more marketing. As we read it, when you push a product into a crowded box, every euro you spend also helps grow attention for the whole box, competitors included. Again as we read it, the first light beers are an example: by talking about health to people who drank little beer, every message reinforced the idea that light beer wasn't for people who really drink beer.

We've also written about this in why the best product isn't enough: the spec sheet matters less than the field in which it's read.

How many signs should worry you?

A single one can have a thousand explanations: a difficult customer, a bad year, a new salesperson. Two or more that keep coming back for months, in our experience at Project Mantra, almost always tell the same story: the company is working hard to win a game in which it starts at a disadvantage.

As we read it, in none of the three cases was it enough to improve the product or raise the volume. Miller also changed the recipe, but light beer had been on sale since 1966, nine years before Miller Lite went nationwide: what made the difference, in our view, was the audience it was aimed at. Lucozade changed its audience, Febreze its moment of use, Miller the reason to buy.