Can Category Equity be measured? Is there even such a thing?
Brand equity is a set of brand assets and liabilities linked to a brand, its name, and symbol, that add to or subtract from the value provided by a product or service to a firm and/or to that firm’s customers. — David Aaker, Managing Brand Equity
Brand. If you Google it:
Marketing has become synonymous with brand. We’ve all heard it. The brand comes first. The power of the brand. Brand perception. Brand loyalty. Before I talk about the category, let’s look at the origin story of brand.
Originally branding that nothing to do with marketing or products. Its etymology can be traced to an old Norse — brandr and old high German — brant. In old English, it translates to burning, torch, etc.
By the 1550s, it started being used as — to brand (“mark made by a hot iron.”) It was used to mark criminals, cauterize wounds and then mark livestock. Branding became a mark to signify ownership. Usually in the form of a symbol.
Cut to the industrial revolution in the 18th century. Suddenly mass production of goods became a possibility. With it consumerism and the need to stand out. More and more companies started “branding” their products with symbols.
Eventually, in order to protect these symbols, logos, and what not the Trade Marks Registration Act (1881) was passed. Incidentally, Samson Ropes was registered in 1884. It's the oldest trademark to be still in use.
As the 20th-century hit and the technology revolution started bigger companies started to take shape. Companies like Coca-Cola, Ford, Chanel, and yes Birdseye. These brands started setting trends. Trendsetters they were called.
They will later be known as category creators and leaders.
- Ford — gasoline cars
- Chanel — suits for women
- Birdseye — frozen foods
Whilst this was happening on the product front, something else was happening on the marketing front. A guy called J Walter Thompson set up the first creative department that would create and design content for his clients.
In the early 20th century he published his red and blue books on advertising. He laid out a blueprint for successful advertising and branding.
As markets grew, the concept of brand loyalty evolved. Billions of dollars were poured into advertising, build brand and customer loyalty. It evolved from just introducing the product, to telling narratives and so and on so forth.
This leads us to the topic at hand. Brand Equity. According to David Aaker, this is what brand equity means:
Brand was valued as an “intangible asset”. And that was different from say the market value of the company.
According to Statistica, here are the top three most valuable brands in the world:
- Apple — $263.38 billion
- Amazon —$ 254.19 billion
- Google — $191.22 billion
Now here’s where it started getting really interesting for me. Guess what else these “brands” have in common? They are category creators and leaders.
- Apple — smartphone
- Amazon — public cloud computing
- Google — online search
They were also companies that put category before brand.
“For potential customers, categories become an organizing principle. The public comes to understand the problem that’s been defined, and then demands a product or service that solves it.” — Source, Play Bigger Book
So I got to thinking. If brand equity is worth X, then what about category equity? Surely these new categories are also intangible assets. But they have not been valued the same way brand equity is.
For example, the smartphone market is valued at USD 714.96 billion in 2020, according to Mordor Intelligence. But this doesn’t take into all the factors as described by David Acker for brand equity. Granted some of the factors don’t apply. But categories created a new future. And that’s got to worth a heck of a lot more than just market value.
Let’s stick with the smartphone category. What would the world look like if that category had never been invented?
We wouldn’t have apps. Without apps, we wouldn’t have ride-hailing — Uber. Without apps we wouldn’t have Postmates, social media prolly wouldn’t be what it is today. We might not have influencers as we wouldn’t have selfies.
Smartphones also democratized education, health, access to the internet in emerging markets. How we get information. How quickly we get news. All this changed. Smartphones also brought with it heaps of environmental and social issues.
Then there are also the intangibles. No Uber means being stuck with bad taxi service. I remember when my parents (for what felt like hours) standing on the roading sticking their hand out to hail a cab. Shudder. Imagine lockdown last year without Uber Eats or Postmates. I’ll wait.
The smartphone category has changed the digital landscape of the planet. Its impact is and continues to be undeniable.
So how can we value the impact the smartphone category had on this planet? What are the factors that we need to consider when measuring category equity? Can it be measured at all? I don’t actually know the answer to that.
But the fact that so many new categories and subcategories were spawned from that one category should give you an indication. At the very least, you would understand the enormous burden of creating new categories and why it's not for everyone. And you will also understand why I keep going on about impact design.
It should also tell you why thinking like category creators is important. Categories not only create the future. They cause revolutions. They tip the world power scales. They shape civilizations and humanity. They change the planet.
The answer to this topic might be category equity is currently immeasurable. If we do crack the category equity formula, can you imagine how it would change VC funding and investments?
Yes, I know. Why go down this rabbit hole in the first place?
Hey, I also never thought Jack Dorsey’s first tweet was worth anything. But NFTs changed all that. I also never thought I could “invest” in Elon Musk. But apparently, through Bit Clout, I can.
Tomorrow NFTs or something new category might not just find a way to “value” category equity. We might even be able to bid for it and gasp “own” it.
A girl can dream. I know which category I would bid for. Do you?