A new category product is one of several classifications of new products (please see separate article). Other classifications of new products include: new-to-the-world products, product line extensions, product improvements and product repositioning.
When a firm introduces a new type of product to the firm, which is an established product in the marketplace, this is known as a new category entry. A product category is related set of products, primarily from the consumer’s perspective. Some examples of product categories would be: books, cars, computers, soft drinks, fast food outlets, banks, theme parks, cookies, and so on.
Challenges of entering a new product category
Some of the concerns and risks associated with entering a new category include:
Possible low market share
The firm is new to this particular range of products, they may lack retailer access, and they are going up against established and possibly aggressive competitors. As a result, there is a significant chance that the product will not do well in the short-term and they may end up with quite low market share initially.
Risk to brand equity
If they do have a strong brand, most likely built within a product category where they have been established for some period of time, and a poorly executed extension into a new product category may damage their reputation and their brand loyalty.
The concern here is that their overall brand may be impacted, including their existing sales of existing products.
Existing retailers who sell the product category are likely to have established suppliers/manufacturers. In many cases these retailers would be concerned about damaging the relationship with their existing manufacturers and may not be willing to expand and accept the products of a new player – particularly one whose products have not yet proven themselves in the marketplace.
As this represents a new line of products, it is unlikely that the firm will be able to leverage is existing manufacturing or production system. This may happen in some cases, but in reality a significant upfront cost will be required to effectively set up the new operations.
Benefits of a New Category entry