Top-performing organizations are always on the lookout for new product and service ideas. New offerings can be more profitable than tried-and-true ones, particularly if they are innovative or unique in the marketplace. They can also help reposition a company in the minds of customers and maintain a brand’s position against fierce competition. Run out of ideas, and dire things are in store for many organizations and their brands. 

The standard marketing approach for coming up with new product ideas is to identify customer needs and fill them. This typically involves examining the organization’s own product portfolios, comparing them to the competition, and interviewing customers about their needs and perceptions. The results often lead to product/service differentiation by coming up with more sensible product designs, for example, or offering new value-added features to standard service offerings.

But customers want all-new products as well as improved ones. Thus, there’s another route to new product development that also relies on satisfying customer needs, even when such needs are vaguely defined: by exploring a product category or inventing one. Understanding the dynamics of a product category better than your competition can create a true strategic advantage.

Know your category, then grow your category

A product category is a label under which goods or services belong, such as “soft drinks,” “car rentals,” and “preventive dental care.” Such categories are important elements in marketing, since ultimately customers think about satisfying their needs in terms of product categories, not in terms of actual need. (For example, someone pushing a shopping cart through a store is more likely to think “I need to buy shampoo” than “I need to clean my hair.”)

By taking a customer-centric approach to a product category, companies go beyond identifying how customers feel about using products to instead identify what customers like and dislike about a product category overall. Doing so can yield valuable insights into potential gaps and the opportunities for filling them. It can give an organization a better understanding of what the “customer drivers” are for its product category while identifying ideas for category growth and expansion.

New and out-of-the-blue categories

Time and again, entirely new categories will emerge from new needs, either driven by technology, trends, events, or simply through closer customer observations and deeper understanding. When it happens, companies must be prepared to respond.

Functional foods are a good example of a new product category driven by Boomers and trends in healthy choices and “down-aging.” The category has opened up enormous opportunities for companies in every corner of the food industry.

At other times when consumers aren’t good at imagining non-existent products, a new product can define a new category. As a result, consumers “learn” what they want or need. For example, Palm products opened up the new PDA category and consumers learned they needed the benefits of a handheld organizer. Likewise, Sony’s philosophy that it doesn’t serve markets, but instead creates them, is illustrated in countless new products that define categories by creating new needs. (Long before the iPod came along, everyone of a certain age “needed” a Sony Walkman.)

As these well-known examples illustrate, finding and promoting category benefits can open up whole new avenues to growth. Consider including category exploration or expansion as part of your product development approach.