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"How Brands Grow" - those three words have become widespread in the world of branding and retail. Thanks to Byron Sharp, we know that brands primarily grow by increasing penetration, not by increasing loyalty. But what about the growth of entire categories?
It's actually quite bizarre that we don't talk about this more often. As a marketer, you can endlessly optimize your own brand, but if the category in which you operate is shrinking or stagnating, you're swimming against the current. This is where the Category Growth Framework comes into play - a scientifically substantiated model that shows how categories grow and what you, as a brand or retailer, can contribute to this growth.
What I find so fascinating about this framework is that it demonstrates that category growth doesn't follow one standard recipe but has different phases. And each phase requires a completely different approach. If you use the wrong strategy for your phase, you can innovate all you want, but you'll hardly see any results.
Let's dive into these three crucial phases of category growth and what they mean for your strategy.
Phase 1: Establish - The Art of Creating a First Purchase
Imagine this: your category has a penetration of less than 10%. Think of electric cars when the Prius first entered the market. In this phase, your main goal is to establish. You want as many people as possible to make that first purchase.
What stands out in the research is that growth in this phase can be quite volatile. It can greatly exceed expectations, but also significantly fall short. That makes sense - you haven't yet built up a stable buyer group.
What should you do in this phase? Focus on broad market coverage. Your portfolio should completely cover the basics - think different packaging formats and price levels. Not too many niches, but rather getting the basics right.
Your innovation should primarily focus on removing barriers to use. Not more gadgets or special features, but rather: how do I make it more accessible? What's stopping people from buying this product? Solve THAT problem.
And physical availability is crucial in this phase. You want to be present in as many channels as possible and have prominent positions there. This all sounds logical, but as your category grows, your playing field changes completely.
Phase 2: Expand - How You Create Occasions That Grow the Category
In the medium phase (10-30% penetration), your focus shifts. You now want to expand. You continue working on increasing category penetration, but the way you do this fundamentally changes.
Now you make your product portfolio more occasion-based. It's now about Category Entry Points - the different moments when people can use your product. Let me give an example from the soft drink category.
Ten years ago, for a party, you simply had cola, orange soda, and 7up. Those were your choices. Now you suddenly have a meter of premium tonics in the supermarket. You have special ginger drinks for your Moscow Mule. You have soft drinks that you take to work, soft drinks for your children, soft drinks for cocktails.
This is no coincidence. This is exactly how a category grows from 10% to 30% penetration. By creating more occasions. Innovations that would "do nothing" in phase 1 (like premium tonics) are now exactly what you need.
It might feel like a chicken-and-egg story. Was there first a demand for premium tonics, or did the supply create the demand? The funny thing is that it often starts with the supply. If you prominently place a new product in the store, people automatically come to the implicit conclusion: this has a right to exist, this is what people want.
Where phase 1 was about physical availability, phase 2 is about mental availability. You want consumers to think of your category on more and more different occasions.
Phase 3: Add Value - Premium Innovation as the Key to Further Growth
Then phase 3, when your category is already mature (more than 30% penetration). Growth flattens and becomes modest. How can you grow further?
The answer is surprising: "expand by adding value." You add premium options. Not becoming cheaper - which is often the intuitive reaction - but actually more expensive.
I hear this often in discussions at the table: "Let's introduce a cheaper variant, then the people who aren't buying it now will try it." But the figures show that this doesn't work at all. What you want is more premium, not more cheap.
In this phase, you broaden your market coverage by adding more expensive options. Through premiumization. This is exactly the opposite of what you would do in phase 1, where you want to remove barriers (including price).
Take soft drinks as an example. Over the past five years, a lot has happened in this category. From basic soft drinks, we've moved to a differentiated landscape with premium options for every occasion. And sometimes it's even the case that you position a virtually identical product under a different brand for a different occasion.
Ginger juice as a healthy shot for yourself, for example, is a completely different positioning than ginger as an ingredient for cocktails. It's located in a different place in the store and has different pricing, but it's essentially the same product with a different application.
This kind of differentiated positioning only works in a mature category. In the early phase, the consumer doesn't yet think in these kinds of compartments.
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What does all this mean for your category? First, you need to determine which phase you're in. Is your penetration below 10%? Then you should focus on the basics and removing barriers. Are you between 10% and 30%? Then it's time for occasion-based innovation. And above 30%? Then premiumization is your key to further growth.
The Category Growth Framework provides a scientifically substantiated roadmap for category growth. It shows that what works in one phase can actually be counterproductive in another phase. And that's valuable knowledge for both brands and retailers.
What I find so fascinating is how this framework connects to what we already know about how brands grow, but takes it to a higher level. It's no longer just about your brand, but about the entire category. And with that, your playing field becomes larger and your potential impact much greater.
In this blog, I've only been able to lift the tip of the veil. In the full webinar, we go deeper into the specific strategies for each phase, look at more practical examples, and you get concrete tools to apply the Category Growth Framework to your specific situation.
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Are you curious about the full depth of the Category Growth Framework? Want to know what specific actions you can take to grow your category? Or are you just curious about more practical examples?
My mouth is already watering thinking about all the valuable knowledge you're going to acquire. Because who knows, maybe your category is ready for the next growth phase - and you're the one who sets it in motion.
