Hello Reader,

Quick! How much would you expect to pay for a hand-sized portion of baked chocolate-flavoured cake batter with various decorations or accessories on the outside?

The answer, it turns out, depends on whether it’s a slice of cake, a muffin, a cupcake, or a cake pop. 90% the same ingredients, very different price ranges, and different places you’d buy them from.

And this is one of my favourite concepts in marketing: redefining categories. Everything you buy sits in a category in your mind. The category it’s in defines the competitors, the attributes that are ‘must have’, the minimum or maximum price you’ll pay, and what you expect it to look like. Mentally, you’ve got a pretty good idea of what trading up/trading down looks like in a category. And you have specific expectations of how well the product will ‘work’ that’ll be different if the product was in a different mental subcategory.

My favourite example in this space is extruded puffed snacks - like the Ceres Organics Puffed Stars. Fundamentally, these are an extruded puffed snack: a dough is made out of the grain input, it’s put through an extruder which is hot + pressurised, it puffs as it comes out of the extruder because the water in the dough is above boiling point, then it’s cooked and seasoned. Super straightforward.

But this is the exact same process that Twisties uses. They’re fundamentally the same kind of product. But no one is paying $4 for 80g of Twisties. In fairness, the Twisties are deep friend for that ‘cooking’ step, where the Ceres Organics product is baked. But a product launched as a ‘healthy twisties’ sitting next to Twisties in the supermarket is basically guaranteed to fail.

The difference is the category positioning. Ceres is in the category of healthy toddler puff snacks. No one is comparing it to Twisties. And that’s the magic of redefining categories.

Aside from exactly where it sits in a store, the category redefinition is done through a bunch of subtle cues. The packaging style and colours. What attributes it highlights. The flavours it chooses to launch with (or avoid). The price point.

In fairness, the Ceres product needing to be mentally positioned separately to Twisties has probably cost it sales: it can be hard to find in stores. Sometimes it’s in organics or with speciality (gluten free/health food). Sometimes it’s with kids snacks. New World SI has recently done a snack category review and I believe it’s ended up in the main snack aisle. But that mental separation from twisties is the reason it works as a product.

My favourite part about this mental model is that it doesn’t just apply to consumer goods. It applies to software and airlines (Jobs to be Done Theory would argue that Zoom and airlines are in the same category, for a certain segment of business travellers). It applies to tv shows. It can even be stretched to be career advice - be 1 of 1 because no one else in your job market can bring the same combination of skills.

It can probably be taken too far, and there’s more to innovation than just category redefinition for its own sake. But it’s worthwhile spotting in stores, and if you’re launching a product it’s worthwhile being clear on the tradeoffs.

What I'm reading

​This one is completely unrelated to consumer goods, but I had no idea that the USA's strategic oil reserves were stored underground in carved out salt deposits. The fact that they carve them out using water is wild to me, and the fact that they need to pump water in to take oil out makes a tonne of sense but is something I had no idea about.

What I'm watching

Berries in USA supermarkets are primarily sourced from one supplier, Driscolls, who doesn't actually grow any berries. This phenomenal video brings together a tonne of interesting threads: how retail concentration tends towards supplier concentration, how selling direct to consumer is a way for smaller producers to survive, and how market concentration has negative effects for product diversity, resilience, and even potentially product safety.

I'm also loving The Warehouse's "This is Warehouse Country" ads, especially this one which blatantly throws shade on Kmart's receipt scanning at the door. I know I bang on about The Warehouse constantly (to be clear: I have no financial incentive from them). But I think they have a tonne of potential and I want to see them win.

That's all from me this week.

Reuben