Marius on Strategy and Communication

What it says on the tin

The Category Matrix: A Holistic Approach to Innovation and Channel Strategy

A constant battle for share of marketing budget rages between product and innovation on one hand and brand and communication on the other. Both sides have compelling arguments, wheeling out a handful of outlier case studies to prove their points: Google, AirBnB and Facebook vs Nike, Dove and Coke. “Just make amazing stuff that sells itself” vs “connect emotionally through purpose and values”.

The reality is, as usual, a little more complex. In fact, every brand relies on a combination of all of the above. However, the effectiveness and relative importance of each vary significantly over time and between categories.

I have tried to simplify this by mapping product and services categories according to two key dimensions, ending up with four distinct strategies that help inform decision making for all categories and at any given point in time.

But before we get to that, a couple of ground rules:

1. There are two types of innovation – Functional and Symbolical – that fulfil the same purpose.

We tend to regard innovation purely in terms of functionality, but this narrow definition often tricks us into seeing innovation where there are mere improvements, as well as preventing us from recognising innovation that doesn’t manifest itself physically. 

A brand is a promise to solve problems for people, and every brand solves a combination of two kinds of problems: Functional and Symbolical. Solutions require two kinds of innovation:

Functional innovation: Functional innovation takes place at a products and services level (including related experiences) and seeks to improve the product’s performance according to the category’s key drivers – be it convenience, safety, quality, flavour, features or some other functional benefit. 

Symbolical innovation: Symbolical innovation solves problems related to identity, status and belonging as defined by the brand strategy, delivered mostly via communications. It resolves tensions in people’s minds and those created by the category or society in general. This requires that the brand has a well defined ideology and a clear sense of purpose. Whereas people actively seek out solutions to functional problems, symbolical problems are largely emotional and subconscious.

The problems brands set out to solve must be unique and meaningful. Problems that only your brand solves leads to differentiation; problems that are important for people to solve leads to perceived value. Solutions must cost less than the perceived value they create in order to create positive ROI (I being Innovation). 

2. Innovation is delivered equally through Product and Communication.

At the moment Product is King and CEO. Communications is seen as a tax for inferior products, from which only Functional Product innovation can exempt you. Brand, in the current view, is a bit of emotion, creativity and entertainment that we wrap around product messages to make these more persuasive (Fig 1).  

However, reality looks more like Fig 2. As a brand is a promise to solve both Functional and Symbolical problems, solutions can be delivered through either Product or Communications, making the two equally responsible for delivering on the brand promise. Product, in this view, is just another communications channel, albeit, as we shall see, the most important one.  Brand-Comms-Product Model.001So, how exactly does the relative importance between Functional and Symbolic innovation, and effectiveness of Product and Communication vary between categories and over time? Enter:

THE CATEGORY MATRIX

Categories can be mapped according to two key dimensions, Lifecycle Stage and Level of Involvement:

Lifecycle Stage: 

Lifecycle stage determines the relative importance of Functional and Symbolical innovation. 

Every category goes through the same life stages: Introduction, Growth, Maturity and Decline, albeit at various pace. In the early stages Functional innovation is crucial as it solves new and meaningful problems for people. 

Growth can be sustained for a while, but eventually the category matures as competitors arrive and catch up. As Functional innovations become ever more incremental (improvements and upgrades are more accurate terms, e.g. the seventh razor blade; 1000th gigabyte; one-less-click process), what was once an investment in growth and differentiation becomes a cost in an arms race to the bottom.

When that happens, Symbolical innovation takes over as the most cost-effective driver of value and differentiation. At this point, the goal should shift towards becoming a leader in Symbolical innovation and follower in Functional innovation.

Level of Involvement

Level of involvement determines the relative effectiveness of Product and Communication as lead channel.

People engage with categories at a number of touchpoints throughout the customer journey, from research and purchase to usage and post-purchase. Level of involvement often correlate with aspects such as price and technical complexity, ranging from cars at the top to toilet paper and tomato paste at the bottom.

In terms of credibility as a medium, the Product, by walking the walk, is by far the most credible, and should thus be used as lead channel whenever possible. The degree to which this is the case, however, depends on the total level of involvement people have with the category. The more inclined people are to spend time with the brand across more touchpoint and with higher level of engagement, the more effective the Product (including services, experiences and owned media such as social) becomes as a communication channel. Category Matrix.001This gives us four distinct types of categories, each with specific implications for innovation and channel strategies (but remember that these are sliding scales, and that there are many other variables that may affect a category’s real position):

Game changers: Early Life Stage, High involvement – Functional Innovation, Product lead: 

This is where we find the Googles, Facebooks and AirBnBs of the world.New business models that solve brand new problems. Highly innovative and involving brands that change the way we behave and consume. The products that are so good they sell themselves through trial and word of mouth. Superior functionality and few major players means little communication is required as there are still unique and meaningful functional problems to be solved.

People have bad memories and the functional innovator won’t be perceived as such forever. Who remembers who invented the first mobile phone, smart phone or digital camera? Smart brands prepare for maturity by creating symbolic value early on (interestingly both Facebook and AirBnB are now doing TV ads). MySpace failed. Netflix was a pioneers in VOD, but now a bunch of major players fighting it out on price. 

In this category we also find brands with monopoly. Government services like Opal comes to mind (or, sadly, as the case is in Norway, bottle shops). Lack of competition means they will stay in the Growth stage forever, or until suddenly it hits a steep decline as legislations change or a new service suddenly takes over. 

Novelties: Early Life Stage, Low Involvement – Functional Innovation, Communication lead.

Here we find new products that are fairly simple to replicate by competitors and thus mature quickly. The brand Rollerblades, for example, created a brand new, cool product, but was quickly forgotten as more symbolically innovative brands took over. New fads in foods and drinks also belong here. While innovation is Functional, growth relies heavily on Communication to drive awareness.

Functional innovation beyond that which gave life to the category is rarely profitable as it cannot solve unique and meaningful problems (low involvement). However, a strong focus on Symbolical innovation from the outset can give life to strong brands.

Icons: Mature Life Stage, High Involvement – Symbolical Innovation, Product lead.

Categories that are maturing but enjoy high involvement. Cars is the prime example, but also many technology categories end up here. Also retail brands like banks and supermarkets for the big role they play in people’s lives and the time we spend with them. This is where maturing game changers often end up, most recently (arguably) wearable tech, video on demand and insurance comparison websites. Technology may lead to more innovation, but it also means earlier maturity.

The combination of Symbolical innovation and Product as lead channel is particularly interesting. Symbolically innovative brands in this category shouldn’t rely on Communication to convey purpose, values and persona – this will have little or even negative effect unless its somehow also somehow reflected in the product and related experiences.

They solution is Symbolical Product Innovation.

Opportunities exist along the entire customer journey – thank largely to technology – from research to post-purchase via the purchase experience and online communities. However, it does rely on a brand strategy that solves unique and meaningful problems. Content, for example, is an area where brands end up with me-too Functional “innovation” rather than using the opportunity to differentiate Symbolically.

In the same way a print ad should be unmistakably yours, so should your innovations. 

Banks, for example, have a wealth of opportunities for Symbolical Innovation. Their core products are complicated and old-fashioned. Innovation here may not solve any unique and meaningful functional problems, but conducted in a way that conveys the brand and thus solves symbolical problems, the opportunity to connect with people emotionally and stand out is great. 

Examples are diverse and include Apple’s design, Tiger Air’s Infrequent Flyer program, McDonald’s Happy Meals and SBS’ “Go back to where you came from”.

It may be why “Share a Coke” was so much more successful than Coke Life.

Commodities: Mature Life Stage, Low Involvement – Symbolical Innovation, Communication lead

The categories that have reached the peak of functional problem solving rely almost exclusively on Symbolical innovation for differentiation. With low involvement innovation must be conveyed through communications. At the extreme end are commodities that struggle to innovate Symbolically, such as sugar, toilet paper and petrol. Higher on the involvement scale are categories such as fashion and soft drinks. Here we find many of the most symbolically innovative brands such as Coke, Lynx, Dove and Nike. Lynx and Nike have even used Symbolic Product Innovation to great effect. Nike may have taken it too far when they created a new category entirely with Nike+. Wearable Tech matured quickly and may have been the reason why Nike eventually dropped out.

SUMMARY

Awareness of a category’s life stage and level of involvement helps us develop more accurate innovation and channel strategies.

Functional Innovation delivers crucial short-term effects, the value of which is eventually surpassed by Symbolical Innovation as the category matures. High-involvement categories have greater potential for the Product to be the lead channel through which innovation is delivered, while Low-involvement categories must rely more on communications. 

This approach to innovation and channel strategies reflects Les Binet and Peter Field’s seminal work The Long and the Short of it, in which they demonstrate how maximum marketing effectiveness is achieved through a combination of short-term (activation) and long-term (brand) strategies – the equivalent here being Functional and Symbolical Innovation respectively. 

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This entry was posted on July 9, 2015 by in Uncategorized.
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