Category labels are not the same as company brand. Brands create unique relationships between customers and your particular company. Category labels, however, are a way to identify a product’s commonality with others of its type. For example, Tesla Motors markets and maintains its distinctive “Tesla” brand, but the category label the company uses to introduce its products is “electric cars.” Categories, like brands, matter in ways that are subtle and profound.
New industries are characterized by an early period of confusion and uncertainty about product use and meaning. The industry that we know today as “cloud computing” started decades ago under labels such as “utility computing,” “time sharing,” “application services provider,” and “software as a service.” While the category label “smartphone” is ubiquitous today, in the late 1990s, Samsung once called a product of that type a “camera phone,” others called it a “PDA phone” and Nokia called it a “gaming deck.”
Contrary to popular opinion in the business press, the first-mover advantage of entering a new market very early can be a disadvantage. But when should companies launch a product in a nascent industry? In a nascent industry or sector, the introduction of the dominant category label marks the start point of the ideal window of opportunity for entry. Before the introduction of the dominant category label, most consumers are reluctant to commit, which often results in a difficult time period for early-entry producers, who must try to convince customers to try their products. The end point of the ideal window for entry is the introduction of a dominant product design into the market; after that, companies need to conform to customers’ expectations for the product category.