How to Create a Product Category

When our ten-year old vacuum sucked its last dog hair on Sunday, I went to Consumer Reports online, hit the Household Appliances link, and browsed the vacuum category under Canister. A few minutes into my search I had enough information to pick a replacement.

Household Appliances and Canister are not just an item description, they're product categories -- like multifunction printers, whitening toothpaste and hybrid automobiles. Product categories are one of those almost invisible lubricants that make commerce flow easily.

Funny thing is, if someone could actually create a product category, untold riches could come their way. After a category called Modern Indian Art was established over the last decade, individual works that once sold for hundreds or thousands of dollars then sold for hundreds of thousands and even millions of dollars.

Why are product categories so valuable?

Think about this for a second. If you know what category a potential purchase belongs in, you can quickly evaluate competitive products, know the prices charged by each and be able to read consumer and expert reviews. The category actually helps establish the value of items in it. (Without categories to organize information for you, searching for new products would be like going into the bookstore for a good mystery and, lacking a Mystery section, having to go shelf by shelf, book by book, looking for appealing titles.)

Given the influence that product categories have on the sales of goods and services, how they are created should be of great interest. So I was surprised to learn that relatively little research has been done in this field. Enter Harvard Business School professor Mukti Khaire, who with coauthor R. Daniel Wadhwani, recently wrote a paper on how product categories emerge.

Their focus was on the aforementioned Indian art scene, which until fifteen years ago was classified as ornamental art, and thus not worth much to collectors and museums. But a number of art advocates -- auction houses, academics, collectors, the artists themselves -- changed that perception by helping to define a new category that described the art and why it is distinctive and valuable.

I asked Khaire whether it was possible for someone to create a product category all by themselves? Alas, no.

"Entrepreneurs should recognize that single actors cannot generate the broad, intersubjective agreement necessary for the establishment of a new market. Rather, entrepreneurs should be cognizant of the important role played by other commercial and noncommercial actors in the ecosystem. For instance, in this case, other auction houses and the media were the commercial actors that enhanced the dissemination of a widespread understanding of modern Indian art, while noncommercial actors such as academics laid the foundations of the new market."

What entrepreneurs can do, she added, is to be aware that a category is under development and be ready to "to generate shared meanings that aid in the creation of markets by establishing the foundation for valuing goods." In other words, be ready to explain the cognitive underpinnings of why you think your work is valuable.

(Painting image courtesy sudhirpatwardhan.tripod.com)