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The power of mental categorization or the key decision to build a brand

Many entrepreneurs and managers first think about the name of a new brand or use various creative techniques. This should not be the first step. More important to the future brand success is the naming of the category in which the new brand should be leading.

The true masterpiece by Dietrich Mateschitz

Red Bull is certainly a great brand name for an energy drink, as it communicates strength and subtly refers to the ingredient taurine. It can also be perfectly visualized. This makes it easier for us to remember; a visual language or visual brand names.

But the true masterpiece was the creation of the category "Energy Drink". This term didn't exist before Red Bull. People don't think in terms of brands, but primarily in terms of categories. This is precisely why broad umbrella brands lose more and more of their power over time.  For example, nobody goes into a Media Market and says: "I'd like a Sony." Sony has no category in our perception.

In the past you could demand a Walkman or a HandyCam, today Sony stands more for a big past than a big future. The big exception, of course, is PlayStation. This has the category game console. Many think of game consoles; many think of PlayStation.

Reality vs. perception

Last year Otto discontinued the famous and legendary Otto catalogue. In fact, today Otto is just as much an online retailer as Amazon or Zalando. That is reality. But what about perception?

When they think of online shopping, they think of Amazon or Zalando. But they probably don't think of Otto spontaneously. So, Otto is still considered more of a classic mail order company. This could become a considerable competitive disadvantage for this brand in the future.

Or take the banks. Every bank today also offers banking transactions online. Nevertheless, the banks are mentally stored in different categories or drawers. So, we have classic stationary banks such as savings banks, Raiffeisen banks or Volksbanken. Then we have the direct banks like ING (formerly ING DiBa) or the brand-new smartphone banks like N26.

Here, the ingenious thing about N26 is that it is not called another direct or online bank, but more and more often the smartphone bank. This makes it the market leader in a new banking category from the very first moment. (Exactly this should be emphasized even more in your own positioning.) That is one side of the coin. On the other hand, it could turn out to be a serious mistake for ING to do without the addition DiBa in the brand name. One thus becomes more of a "bank".

Category, Category, Category

This means that if you are thinking today about positioning a new brand or repositioning an existing brand, you should first think about the category in which your brand should play a significant or better leading role. It is not so much a question of product or service reality as of brand perception. So simple in theory, so difficult in practice.

This blog was translated from the following article:

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Campaigning in the age of algorithms 2019 

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