Should a Small Company Create a Category?
Category Design, Subcategories, and the Cheaper Way to Stand Apart
Short answer
Most small companies should not create a new category. It means teaching buyers a problem they have no word or budget for, which is expensive and slow. Most do better owning a subcategory: an existing category buyers already search for, plus a qualifier that makes them the obvious choice for one segment or situation.
1. What is category design, and where does the idea come from?
Category design is deliberately creating a new market category that a company then leads. The 2016 book Play Bigger popularized the term, building on an older idea from Al Ries and Jack Trout: be first in a category, or create one.
- Category design
- The practice of defining and naming a new market category, teaching buyers the problem it solves, and positioning one company as its natural leader.
- Also known as: Category creation
Play Bigger, by Al Ramadan, Dave Peterson, Christopher Lochhead and Kevin Maney, presented category design as a discipline in 2016 [s1]. The underlying idea is older. In The 22 Immutable Laws of Marketing (1993), Al Ries and Jack Trout described a Law of the Category: if you cannot be first in a category, set up a new one you can be first in [s2].
April Dunford's Obviously Awesome (2019) puts the choice in more practical terms. She describes three styles of positioning: winning an existing category head to head, winning a subsegment of an existing category, and creating a new category [s3]. That framing is the useful one for a small company, because it makes category creation one option among three rather than the goal.
2. Why is creating a category usually a bad bet for a small team?
Because a new category has no search demand, no budget line and no reviewers, so you pay for all three. A small team spends its limited attention teaching the market instead of selling to the part of it that is already looking.
What a new category costs that an existing one does not:
- No search demand. Buyers search for problems and category names they already know. Nobody types a category that does not exist yet.
- No budget line. Purchases are approved against an existing line ("booking software", "marketing tools"). A new category has to argue for money before it can argue for itself.
- No reference points. Review sites, comparison articles and colleagues cannot vouch for a category they have never heard of, so every buyer starts from zero.
- Education benefits followers. The company that explains a new problem often creates demand that a larger competitor later captures with more budget.
None of this makes category creation wrong. It makes it expensive, and the cost is paid in exactly the resources a two to fifteen person team has least of: sustained attention and patience.
3. What are the alternatives to creating a category?
Compete head to head in an existing category, or own a subcategory of it. For most small companies the subcategory is the sweet spot: buyers already understand the noun, and the qualifier makes you the default for one segment.
| Style | What you claim | Works when | Main risk |
|---|---|---|---|
| Head to head | The best option in an existing category | You are clearly better on what buyers already value | The leader has more budget, reviews and awareness |
| Subcategory | The best option for a named segment or situation within a known category | One segment has needs the leaders serve poorly | The segment is too small, or a leader adds the missing piece |
| New category | A new kind of solution to a problem buyers may not name yet | The existing categories make your strengths look like weaknesses | You pay to educate a market someone else captures |
A worked example. Say your company sells booking software to independent physical therapy clinics, and you are considering calling it a "practice flow platform", a new category. The alternative is "the booking system for independent clinics", a subcategory. Clinic owners already search for booking systems, already budget for them, and already compare them. The qualifier does the differentiating work, and nobody has to learn a new word.
4. When does creating a category actually make sense?
When every existing category frames your product badly, buyers are already struggling with the problem but lack a name for it, and you can sustain the education effort for years. All three need to hold.
| Condition | How to check it | Red flag |
|---|---|---|
| Existing categories frame you badly | Describe yourself with each existing category name and list the wrong expectations it creates | One existing category fits well enough |
| The problem is felt, even if unnamed | Reviews, forum threads and sales calls describe the struggle in their own words | You have to explain the problem before anyone recognizes it |
| There is money for it somewhere | Buyers can say which budget would pay | Nobody can name a budget line |
| You can sustain the effort | Content, sales and product are aligned on the new language for years, not a launch | The plan depends on one campaign |
| Others will adopt the term | Customers, partners or even competitors start using your name for the category | Only your own team uses it |
5. How do I name a subcategory?
Keep the category noun buyers already use and add one qualifier that names your segment, situation or approach. The noun gets you found and understood; the qualifier makes you the default for the people it describes.
- Take the noun from buyer language. Use the word customers use in reviews and sales calls for the type of product, even if it feels plain. In the clinic example that was "booking system", not "scheduling platform".
- Choose one qualifier. A segment ("for independent clinics"), a situation ("for clinics without a receptionist") or an approach ("that refills cancelled slots"). One, not three.
- Check it against competitor copy. If a competitor already uses the same qualifier, the subcategory is taken. Look at their homepages and current ads before settling.
- Use it everywhere, word for word. Homepage, directory listings, bios, sales decks. A subcategory only becomes yours through repetition, and variations make it look like a description rather than a position.
6. How do I know a new category is actually forming?
Other people start using the term without being told to: customers in reviews, competitors on their homepages, review sites in their menus, and searchers in Google Trends. Until that happens, the category exists only in your own copy.
These signals are observable, which makes them a better test than internal conviction. Check them twice a year if you are trying to create a category, and before you commit if you are considering it.
- Customers use your category term unprompted in reviews and sales calls.
- At least one competitor starts describing itself with the same term, which is irritating and also the clearest sign the category is real.
- Search interest for the term appears in Google Trends, which shows relative interest over time rather than absolute volume [s4].
- Review sites or directories add it as a category or filter.
Oppira tracks the homepages, ads and posts of the competitors you follow, so you can see when a rival starts borrowing your language or introduces its own category term. The Playbook's Market Reality Check and Differentiation layers keep the category decision written down, with the evidence that informed it.
7. What should I do if a competitor is creating a category?
Let them pay for the education, and position yourself inside it for a segment they serve poorly. If their category catches on, you benefit from the demand. If it does not, you have lost nothing.
A competitor announcing a new category is not a threat to respond to immediately. Watch whether the signals above appear. If buyers start using the term, describe yourself as the option within it for your segment. If they do not, the competitor has spent its budget on a word, and your existing subcategory is unaffected.
The guide on differentiation strategy covers how to choose the ground you defend, and the guide on competitive alternatives covers how to map what buyers compare you with, which is the input to any category decision.
Key Takeaways
Category creation is one option of three
April Dunford frames it alongside competing head to head and winning a subsegment. Treat it as a choice, not a goal.
A new category has no demand, budget or reviewers
You pay to create all three, with the resources a small team has least of.
Subcategories are usually the sweet spot
Keep the noun buyers search for and add one qualifier that makes you the default for a segment or situation.
Check five conditions first
Bad fit with existing categories, a felt but unnamed problem, a budget, years of sustained effort, and outside adoption of the term.
A category is real when others use the word
Customers, competitors, review sites and searchers adopting the term are observable signs. Internal conviction is not.
Let rivals pay for the education
If a competitor creates a category, position inside it for your segment once buyers start using the term.
Frequently Asked Questions
Sources
- Play Bigger: How Pirates, Dreamers, and Innovators Create and Dominate Markets Al Ramadan, Dave Peterson, Christopher Lochhead, Kevin Maney (HarperBusiness), June 2016.The book that popularized category design as a named discipline.
- The 22 Immutable Laws of Marketing Al Ries, Jack Trout (HarperBusiness), January 1993.Source of the Law of the Category.
- Obviously Awesome April Dunford, January 2019.Describes three positioning styles: head to head, subsegment of an existing market, and a new category.
- FAQ about Google Trends data Google, September 2026.Trends values are normalized to a 0 to 100 scale of relative interest.
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