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Category Extension: Look Far, Look Beyond

By Gaurav Gupta

When Steve Jobs introduced the iPod to the world in October 2001, he said, “Apple has invented a whole new category of digital players that lets you put your entire music collection in your pocket and listen to it wherever you go.” Digital music players of course existed much before the iPod, but Apple extended the product category to give music lovers something that they had not yet experienced.

Digital music players were either big and cumbersome to carry or small and useless. Apple understood that the Web had made accessing music easy, but what would a music lover do with all the songs that he / she had downloaded? The existing digital players could not store more than a dozen songs. And then came in Apple with a music player that could store up to 1,000 songs (the first version of the iPod held 5Gb music). The sleek, attractive product design added to the must-have factor.

At the heart of the iPod story has been the company’s ability to listen to the consumer’s need and extend the product category to meet that need. This is classic ‘category extension’ through form evolution, where a company creates new forms of products because there is a need for such products in the market. The need may be latent like in the case of the iPod, or expressed where that need is already being serviced by competitors.

An organization can choose between two approaches to define its category portfolio: By the products that it offers or by the needs of the consumer. The first definition is self-limiting and does not allow the organization to look beyond what it already offers. The second definition encompasses the various areas in which there is scope for the organization to extend the category. Another example of this is that of a baby products company selling diapers. Instead of limiting the product category to baby hygiene, the company sees an expressed need for baby grooming products like shampoos, powders and lotions, and toys and accessories. It also sees a latent need for extending the category further by offering services to expectant parents, like Lamaze and parenting classes.

As an organization, you may not want to extend the category to play in every possible product and service. Nevertheless, it is important for you to understand the various categories that exist within the markets where you play. For that, you need to have answers to these questions:

What are the latent and expressed needs of the market in which I play? What products / services constitute a logical extension of the products and services that I currently offer? Do these products / services fit in to my organizational goals?

With category extension, an organization can leverage its existing brand power to offer new products and utilize its existing retail network to its advantage. Identifying category extension opportunities is still a less-evolved concept in the consumer packaged goods industry, with only a few companies actively involved in it. Organizations need deep consumer insights and guidance to decide what the demands of the market are; how to cater to that need and what constitutes a logical extension of the portfolio. Experienced research and analytics consultants can help organizations in finding answers to these questions and adopting the right strategy.

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