Product Categories Explained: A Simple Mistake that Hurts Startups
TLDR: 3 Takeaways from this Post:
Don’t invent a category unnecessarily. If buyers don’t recognize your category, they won’t spend the time figuring out where you fit.
Anchor in something familiar. Using an existing category makes you discoverable, credible, and easier to understand.
Expand later. Once you’ve built traction and trust, you can reframe your category.
Many startup leaders face one deceptively simple question that creates real confusion: what product category are we in?
It’s especially tricky when your service or product can be applied to lots of different use cases. I’ve seen too many leaders resist labels, or worse, invent a brand-new category because “nothing quite captures how innovative we are.”
If you are one of those leaders advising your marketing team that “We can do anything for anyone - find the category that makes that clear,” please (please) keep reading.
Fact: Unless you have already established a strong reputation or have serious financial resources, creating your own category will hurt you by leaving you invisible.
Why Product Categories Matter
A product category is simply the mental “folder” buyers use to understand you. Project management software. Digital payments. Customer engagement. These are familiar buckets.
And it’s a consequential choice because you’ll be asked to pick a category constantly:
When you fill out your LinkedIn company profile
When you choose a listing in a SaaS marketplace or app store
When investors want to know who your competitors are
When analysts include you in a market report or buyer’s guide
Categories matter because they act like:
Search terms. Like SEO, categories help people find you.
Shortcuts. They make it easy for buyers to know if you’re relevant.
Signals. They show the market where you fit and who you compete with.
If no one recognizes your category, customers won’t know where to put you, and they won’t spend the time figuring it out. There are plenty of competitors out there making it easy on your target customers.
Real-World Lessons
Slack (Got it right). Slack could have overcomplicated things by calling itself a “collaborative digital workspace.” Instead, it went with team communication. Clear, relatable, and easy to understand. Only later, once it had traction, did Slack expand into “your digital HQ.”
Clubhouse (Got it wrong). Clubhouse had a moment of massive hype, but it never grounded itself in a clear category. Was it social networking? Podcasting? Live events? By trying to be all three, it left potential users unsure where it fit into their lives. Without a solid category, the excitement faded and so did its hopes for growth.
Airbnb (Middle ground). Airbnb could have leaned on jargon like “peer-to-peer experiential travel marketplace.” Instead, it called itself part of travel and hospitality, which buyers already understood. Even today, Airbnb is categorized as “home rentals” - they transformed the industry but still keep their category as simple as possible.
The Challenge for Startups
This is where early-stage companies get stuck. Choosing a category feels final, like shutting the door on all the other directions you could grow. When you need money, and are ready to take it from any willing customer, saying yes to one thing can feel like saying no to all other things.
But the opposite is true: clarity creates traction.
Anchoring yourself in a known category doesn’t limit your pipeline; it makes you discoverable. You can always broaden or redefine later, when you have customers, funding, and brand credibility to carry the weight of a new category.
Saying yes to everything never works. Customers are right to suspect that a young unknown company can’t do everything right. And your business won’t develop elevated or specialized skills if it’s diluting its solutions.
If you are struggling to zero in on a product or service category, it’s a big clue that you are struggling to understand what your company is best at.
The Takeaway
For young companies, the smartest move is simple:
Pick a category people already know.
Anchor your messaging there.
Build traction.
Think of it like SEO. You want to show up where people are already searching. Reinventing the wheel might feel bold, but it’s almost always a detour to obscurity.
If you’re wrestling with how to position your company, let’s talk. I help founders and teams cut through the noise and find the right language to stand out.
