book-cover 2
book-cover 2

This post is a continuation of a prior post in which I discussed launching a new product into a pre-existing category.  In this post I will explore the issues related to building a New-Category.  In my prior post I emphasized the importance of correctly ascertaining whether your product is a member of a new or pre-existing category.  Getting it wrong can be catastrophic.

Sometimes your customer has no basis of understanding (or framing) your product.  By that I mean that they:

  • Don't know where to find it in retail or through a distributor or channel partner, and they
  • Don't have a basis upon which to understand the value(s) of the product and compare it to other products

In this case the primary marketing objective is to teach the customer by establishing the need, and then establishing the solution to that need in the form of the company's product.

For example there are many exercise products for which if you stumbled upon them in a sports equipment store it would be unlikely that you would be able to guess their use and value.  We often see these types of products on TV Infomercials and there's a good reason why.

The main thing to recognize is that for launching new categories the cost of marketing is substantially higher than for products sold in pre-existing categories since the media cost is a function of how much information must be transmitted to the customer.   For launching a new category abundant media must be used to tell the complicated narrative that establishes the need and value of the product.

A common example of category building is through television infomercials and the structure of those infomercials have evolved to a very formulaic model.  They always:

  1. Describe the need and the pain.  Often, the infomercial uses b&w images to look even more depressing when describing the pain
  2. Describe the solution to the pain achieved with the new product.  For this section everyone smiles, and it's in color of course
  3. Provide a testimonial or evidence that the product works.  Often a famous spokesperson can assist in building credibility quickly and is well worth the investment.  Alternatively, a demonstration can sometimes prove the point.
  4. Define the transaction or the specifics of how to buy the product.  For example a telephone number or web URL is offered.
  5. And Finally, a "call to action" is used that offers some special incentive if the buyer will act NOW, immediately, and not one second longer.

Note that the most important feature of a direct marketing advertisement is number 5, the call to action.  A properly designed "call to action"  must penalize the customer for waiting, and reward them for moving immediately.

A typical direct marketing campaign will spend half of the total revenue on media cost.  That's an enormous investment in communications which would be unsustainable for products that are typically found in pre-existing categories, for which margins have been compressed through competitive pressures.

Alternatively, new category products can be priced without regards to competition because, by definition, there isn't any.  Thus, typical selling prices for new category products are seven to ten times the manufacturing cost (as compared with two to three times the manufacturing cost for mature pre-existing category products).

But don't be fooled into thinking that the net profit is so much higher for new category products simply because the ratio of sell price to cost is so much higher.  The selling costs are significantly higher for new category products as a direct result of the need for more sophisticated storytelling as part of the sales process.

Note that many fabulous products are simply unsellable because the cost of media needed to describe the value system is so high that it places the selling price of the product beyond an acceptable level for the customer.

Various marketing methods have been used to launch new category products including direct sales through the Internet, multilevel marketing (like Avon), and specialty channels like Sharper Image that focus on new category products and a rich selling environment.  Once enough media money is bought, it's often the case that a new category morphs into a pre-existing category and more conventional channels can be employed.

When I was a kid, if you wanted to run a TV ad, you needed to be able to afford a huge investment in media because each station broadcast to the entire country. If you weren't certain that the ad would work, the risk was enormous.

Alternatively, today, with segmented media that is available through either cable TV or the Internet, it's easy and significantly less expensive to test and tune direct marketing campaigns.

Remember that the first step is to figure out whether your new product is a member of a pre-existingcategory or a newcategory and you must pick a marketing plan that is based upon that observation.  And also keep in mind that a product can be both new and pre-existing simultaneously in different parts of the world or even for different demographics.

For example, a pair of Bose noise canceling headphones could be pre-existing when sold to experienced travelers at the airport, but new when sold to those who have never heard of the concept of noise cancelation.  As a result, two different campaigns, each aimed at a different segment must be used.

About the Author

Bob Caspe is the CEO at the International Entrepreneurship Center (   He has started three companies, has taught thousands of entrepreneurs around the world, and has mentored and taught students at MIT and Babson College.

Download a copy of his book: Entrepreneurial Action at

Bob's personal website: