Snapshot : Challenger brands live with challenge every day. In this article, we review the eight factors that support a challenger brand approach, from breaking with the past to being ideas centric. Use these as inspiration for how to make your brand challenge better in 2022.
It’s been a challenging year (again), hasn’t it? But challenges make you stronger, like learning from your mistakes makes you smarter.
In marketing, sometimes challenges are out of your control. They happen to you. You respond with mitigation plans, and a flexible approach.
Competitors launch something new. Customer attitudes change. Retailers rehash their listings.
But a better approach to challenges is to be the brand that sets them, not responds to them.
Take the lead. Set challenges for the market that are driven by you. When you’re a challenger brand, competitors have to respond to you.
Clearly, that’s much better. Better to be a challenger than to be challenged. But who sets the most challenges in the market? You’d expect it to be the market leader, wouldn’t you? But in reality, it’s rarely them.
The blessing and curse of market leadership
Every category has a market leader. The brand that sells the most. But market leadership can be both a blessing and a curse.
It’s a blessing because you’ve already got customers. You don’t need to spend so much finding new ones. Plus, your size means you can negotiate better prices with suppliers and distributors. Sales are high, and profits are good.
But, it can also be a curse. You want to defend that strong position. That means not taking risks. And usually you have to go for a cost leadership competitive strategy. You keep prices and costs low to hold on to sales and profits.
This means market leaders are often predictable. They’re slow. Their decision-making is conservative. They play it safe. Market leaders do everything they can to keep the status quo.
In Clayton Christensen’s book, The Innovators Dilemma, he talks about a crisis point when market leaders are growing.
They become so focussed on what’s driving their current success, they become blind to the future needs of the market.
This short-term focus makes them vulnerable to brands who do look to the future.
That’s where challenger brands come in.
What is a challenger brand?
Challenger brands are the number two and below in the category. They can be anyone who’s not the market leader.
Unlike the market leader, they’re not locked in to cost leadership. They have more flexibility, can move faster and be more audacious.
Their preferred competitive strategy is focussed differentiation. They aim to be different and better.
The term became popular through Adam Morgan’s book Eating the Big Fish, which came out in 1999.
That book set out a way for challenger brands to think and act.
To drive rapid growth by being thought leaders, rather than market leaders.
To act with speed, agility and focus to win new customers and build loyalty.
This approach “challenges” the market leader. The brand tries to “overcome the (market leader) monster” (see last week’s article on story types). There are eight ways to support this approach. We’ll look at examples of how brands use them, to inspire ideas you could use in this year’s plan.
Break with the immediate past
There’s a concept in psychology known as the curse of knowledge.
It’s a cognitive bias based on the idea that the more you learn about a subject, the harder it is to imagine what it’s like not having that knowledge.
You forget not everyone knows what you know. You lose sight of what and how non-experts think.
That can close you off to different ways of thinking. You’re committed to think a certain way because of the time spent gathering the knowledge.
This means you’re not open to alternative views. You’re not interested in new approaches that change what you know now. You become set in your ways.
Market leaders have this curse. What they did to become market leader closes off their thinking. It makes them risk-averse. They’re locked in to a view of the market, and assume nothing will change.
Challenger brands on the other hand don’t have this fixed mindset. They don’t start as experts in the category. They challenge assumptions with an open mind. Challengers look forward, rather than back, to find better ways to meet customer needs.
Look at the way we watch movies at home for example. The market leader used to be Blockbuster. You went to their store and rented physical copies of the movies.
Then challenger brands like Netflix changed all that. Famously, the idea for Netflix came about when the founder got annoyed by Blockbuster’s late fees.
They challenged by finding new ways to deliver home movies – first with an online mailing service and then with video streaming.
That changed the market, and Blockbuster no longer exists. Streaming is the norm.
Netflix is a great example of a challenger brand rethinking how to meet a customer need. They challenged “the past” assumption, that you had to go to a store to rent a movie. They found a better way, that meant customers could rent movies without even leaving the couch.
The book calls this approach Intelligent Naivety.
Challenger brands are open-minded. They question how things currently work in the category. And they have the imagination to find better solutions for customers. Why does the category have to be like this?, they ask. What could it be like if we did it differently?
It’s easy to find examples. Budget airlines eliminating in-flight extras to keep flight prices low. Meal delivery services like Uber Eats where you order restaurant food online. Electric cars you “fill up” at home rather than at a petrol station.
You need a culture that encourages breakthrough ideas to deliver this. Challenger brands think about how to motivate and organise teams. They arrange resources, environments and processes to think this way.
Be a lighthouse identity
Once you start to challenge category assumptions, your view of what the category needs diverges from how the market leader sees it.
You think more about how the category could be in the future, and less about how the category is now.
But you still need to convert that thinking into a strategy and plan.
You need to create your brand identity, and as the Big Fish book calls it, make it a “lighthouse identity”.
This is an identity that clearly shows who and what your brand is, and creates an identity you project “intensely, consistent and saliently”.
The lighthouse part comes the idea that once you set your identity, you keep it relatively fixed and constant. It shines out into the world and customers use it to navigate.(rather than you navigating to them). The identity shines out in your communications, and in your customer experience.
Look at Red Bull’s “gives you wings”, for example. Their daredevil identity comes though in their Formula 1 sponsorship and PR events like the Stratos project where a stuntman parachuted from the edge of space.
Look at the famous Avis “we’re number two so we try harder” campaign from the 1960s. Those ads showed their identity with specific examples of their customer service standards.
The lighthouse brand identity sets a clear and consistent point of view on what the brand stands for and how it acts. Customers should see the value in that view, and see it as uniquely part of your brand. Customers who relate to the identity feel “this is a brand for people like me”.
Become the Thought Leader
“Thought leader” has become a bit of a cliche these days, but back when Eating the Big Fish first came out, it was quite a radical thought.
The traditional view of a business that “leads” the market is the one who sells the most.
But, challenger brands can “lead” the market, by being the first and the fastest with innovation and new ways of thinking.
It’s about speed, not size.
It challenges an assumption that size drives success. Instead, it suggests how do you things is more important in the long run. Challenger brands lead the market by challenging the way the category works.
For example, air travel used to be expensive. But challenger brands like Southwest in the US, EasyJet in Europe and Jetstar in Australia changed the way customers think about air travel with cheaper, no-frills options.
When Apple launched iTunes back in the early 2000s, they challenged the way customers thought about buying music. You no longer had to buy a whole album, buying individual tracks for 99 cents instead.
Thought leaders see problems differently and find better solutions for customers.
When Google started for example, it had plenty of competitors in the search engine market.
Those competitors saw search as a way to sell advertising space though. They bolted on extra content resulting in clunky cluttered search pages.
But Google realised this customers didn’t want this. Their clean stripped down search page changed the way people thought about search.
Create a symbol of re-evaluation
The next way to drive a challenger brand approach according to the Big Fish book is to create a symbol of re-evaluation.
This symbol becomes a brand asset, either tangible or intangible, that acts as a short cut for customers to understand the brand identity.
These assets could be something simple such as a brand logo or icon. The book references the Nike Air Jordan jumping man symbol for example. Or it could be something much more experiential, with lots of public relations impact.
For example, Red Bull’s Flugtag where they challenge people to come up with novel ideas for human-centred flight. This is a great symbol of the Red Bull “gives you wings” brand identity by asking people to literally build their own wings.
You can also build the symbol into how you deliver the product or service.
Take Starbucks for example. We take baristas for granted now. But when Starbucks first came out, the idea of having staff rigorously trained to make the best coffee was novel. Their barista training was a symbol of their identity as passionate about great coffee.
Or think about how Tesla has challenged how people think about electric cars. Electric cars used to be deeply unfashionable, looking like science experiments, or with slow performance like the Toyota Prius.
But Tesla have shown electric cars can also be stylish and have high performance. They use the design and technology of their cars as a symbol to make customers think differently about the category.
There’s a well known quote from Michael Porter that the essence of strategy is choice. Not just what you choose to do, but what you choose not to do.
Challenger brands have less resources. They have to choose not to do some things to focus resources on the things that matter most. Their competitive strategy is focus differentiation, and that means they get rid of anything that doesn’t fit that focus.
For example, in the toddler formula milk market, many brands use price discounting as a way to attract mums and stop them switching to cows milk.
But the brands like Aptamil who focus on quality don’t price discount. That’d go against their lighthouse identity. They sacrifice short-term gains for the longer term gain of having a high quality image.
Apple are one of the best known challenger brands for sacrifice. They limit their range. They remove features to make their products simpler and more stylish (part of their lighthouse identity), rather than add features that customers don’t need.
Deliberately divisive positioning
Sacrifice also appears where you deliberately position a brand to NOT attract certain segments of the market. Some challenger brands use a divisive positioning to put off customers they don’t want, which creates stronger bonds with customers they do want.
Brands like Marmite and Laphroaig whisky for example have run campaigns that polarise opinion by saying this product’s not for everyone. Love it or hate it. It’s better to have a mix of people who love and hate your product, than a bunch of customers who find your product average.
Challenger brands sacrifice the middle ground to own a specific territory in customers’ minds.
When challenger brands for after a specific positioning, they go after it hard.
They dedicate all their resources – people, time and budget – to own that position, and go beyond what you’d think was a “normal” level of commitment.
For example, in Made to Stick by Chip and Dan Heath, they talk about the US department store chain Nordstrom and how their position is around exceptional customer service.
Their challenger brand identity is they go far beyond what other businesses do to keep customers happy.
For example, there’s a story about a Nordstrom customer who got a refund on a set of tire chains. Even though Nordstrom has never sold tire chains.
Another story talks about a customer who’d bought a product at Macy’s, but came into Nordstrom’s to get it gift-wrapped.
This level of commitment through a whole business demands a challenger brand culture. This defines how the business does things, and leadership teams need to show the way, and back up their teams.
It often means breaking assumptions about how businesses should work. Challenger brands think differently about finances, operations planning and measurement. They overcommit to deliver their identity. Everything else comes second.
Enter Popular Culture
The way challenger brands act, with breakthrough ideas and commitments to new approaches can often capture the public’s imagination.
They can become “hit” brands, that become part of popular culture.
They’re seen as the most popular, used by the most influential people, and the most talked about.
Eating the Big Fish came out before social media really took off.
But you can see in the likes of Facebook, Instagram and LinkedIn, that challenger brands do well in those channels. Brands and culture are more closely linked together now than in the past.
Challenger brands become more popular when they associate with popular influencers. And those influencers get more popular, as they associate with popular brands.
Challenger brands can’t match the advertising spend of the market leader. So smart public relations, especially connecting with influencers, can be a cost-effective way to increase the appeal of the brand.
Out of all the approaches Eating the Big Fish talks about, this one is the most debatable. Certainly, some brands can and should do this. But you can still be a challenger brand, even if your category or context will never be a good fit with popular culture.
Become ideas centred
The final area of the challenger brand approach is to be ideas centred. To have a pipeline of ideas you use to create momentum.
One idea isn’t enough. You need stream of new ideas coming through.
Challenger brands don’t sit still.
They come up with new ideas to push the boundaries on their lighthouse identity and their overcommitment to being a challenger.
New ideas stimulate the imagination and stop customers getting bored. They strengthen the challenger brand’s competitive position, and keep the customer relationship fresh.
Conclusion - Challenger brands
Challenger brands aren’t the biggest in the category, but they aim to be the smartest.
They can’t outspend the market leader, but they can outthink and outplay them.
Challenger brands don’t accept the status quo. They challenge it.
Challenger brands take more risks, move faster and focus more. They challenge the market leader, because they do what they market leader can’t do.
Being a challenger brand means being comfortable with challenge. Challenger brands don’t have it easy. You take on a competitor who’s bigger, got more money, and who your target audience already know.
But fortune favours the brave. It also favours the smart. Challenger brands need to outthink and outplay the market leader. We challenge you to think and act like a challenger brand this year.
Check out our articles on how to be a more creative company and how culture drives breakthrough innovation for more on this topic. Or contact us, if you need help with the challenge of being a challenger.