How Challenger Brands Attack – Part 1

Why join the navy if you can be a pirate? So said Steve Jobs, the Apple founder. In my view, the challenger is always the most exciting of market positions because you are more motivated to win. Who wants to run a forgotten second when you can have a serious crack at first place?

There are challenger brand strategies you can deploy as you are climbing your way up the ladder of market share. The road to winning market share can be hard if your market leader is vigilant and aggressive. (It’s a whole lot easier when they are asleep on the job.) But market leaders do lose their leadership, so pump your adrenalin, and put some of the following strategies into action.

In Part 1, How Challenger Brands Attack, we’ll examine what constitutes a genuine challenger brand and what advantages are on the challenger brand’s side.
 

What is a Challenger Brand?

Some people think any brand that isn’t the market leader is a challenger brand. Not in my view. A Challenger Brand is a competitor that is strong enough to launch a sustained attack on a market leader. Whether your business is in the challenger position depends on the resources you have to attack over an extended period of time.

Challengers are often the Number 2 brand in a category. To use an example, Telstra is a market leader, and Optus is a serious challenger. (It helps that the company regulator sides with the underdog in Australia although with Singtel as its owner, one could question the validity of Optus’ underdog status.)

If you are a Challenger Brand, your focus needs to be squarely on the market leader. Your mission is to attack the market leader as opportunity presents itself, and to weaken it by eroding its market share. While attacking a number three or four brand may be easier than attacking the market leader, it isn’t as advantageous. A serious challenger wants to take the leadership position and to achieve this it needs to rattle the leader.

The success or failure of attacks depends on whether the challenger:

  • Is able to sustain attacks over time.
  • Attacks in a way that is damaging to the market leader.
  • Is perceived to be different to the market leader.
  • Is able to provide comparable product thereby offering a genuine alternative.

 

The Advantages of Challenger Brands.

The challenger has many advantages on its side. An advantage is a weapon that can be deployed for use against the enemy, in this case, the market leader. Amongst the challenger’s advantages are:
 
IT’S EASIER TO ATTACK THAN DEFEND (EVEN IF MOST ATTACKS FAIL)
The market leader has much territory to defend and, for most of them, covering it all is almost impossible. The leader is vulnerable to attacks, the challenger can attack on a small front to make good inroads. If the market leader tends to wait-and-see, it may have time on its side.
Psychological advantages. Less to lose, much to gain.

Challengers have attack attitudes that drive them to win. And every portion of market share taken from the leader is a victory worth celebrating. Market leaders don’t have the same sense of winning, but experience a heightened sense of loss. The challenger grows confidence, the leader becomes weakened. This may motivate the market leader to make a strategic mistakes that benefit the challenger.

The most famous example of this strategy occurred when Pepsi, already gaining market share through running its “younger generation” theme, ran taste-tests that showed consumers preferred the taste of Pepsi over its rival, Coca Cola. Amazingly enough, Coca-Cola was intimidated enough to change its product in response. It validated the Pepsi campaign and confused Coca Cola loyalists.
 
CHALLENGER BRANDS ARE NOT ALONE.
There is one leader and many competitors hungry to take market share. Think “my enemy’s enemy is my friend”. Challengers can strengthen their position by entering into strategic alliances and cooperative relationships with other competitors and form a united front. Smaller competitors can pool resources, present united fronts to regulators, form buying groups to secure cost advantages and more.
 
THE SYMPATHY VOTE.
There are always consumers that will buy from non-market leaders as a form of protest or pro-competition position. They like to support the underdog, partly out of a sense of justice, and partly because support for the underdog means that competition remains in the market. With competition in the market, it is assumed that prices will be kept at an acceptable level.

Of course, no brand is able to appeal to everyone. The market leader wants to appeal to the biggest or most important part of the market but, in doing so, is unlikely to appeal to smaller niche or specialized markets which may provide extremely profitable share for the non-leading brands.
Challenger Brand Believability.

Depending on the challenger’s brand position, it is easy to make the consumer believe that the challenger is the “good guy” at the expense of how the consumer perceives the market leader. This is clearly the Virgin story, but is a common story with many challenger brands that enter the market at lower price levels, forcing the leader to reduce prices to defend its market share.

A challenger can turn tables because it is in opposition so it should tell the opposite story. The most prominent example of this was the battle fought long ago between rental car companies, Hertz and Avis, which led to an Avis advertising campaign acknowledging its second place status and encouraging consumers to support it because “it tried harder”. It’s “queues were shorter” than the leader, Hertz.
 
THE REGULATOR SUPPORTS THE CHALLENGER BRAND.
In most developed countries, challengers are protected and the behaviour of market leaders is carefully scrutinized. This is because many Governments seek to promote competition and fair trade in the market place to benefit consumers, business and the community.

In Australia, for example, the regulator regulates certain network industries including telecommunications, energy, water, post and transport. Their role includes the promotion of access to monopoly infrastructure assets. Specifically, the regulator provides pricing oversight and forces third-party access to ‘essential’ services that it deems necessary to curb the market power of monopoly infrastructure.

Securing a regulator or company watchdog on the side of the challenger can be extremely advantageous. While the challenger brand can focus on the competitive battle for market share, the leader can be distracted through managing regulatory intervention. By using this strategy, the challenger seeks to (a) distract the staff and tie up the resources of the market leader n managing the regulatory requirements and (b) secure a legally-sanctioned advantageous competitive arena for itself.

To maximize the use of this advantage, challengers need to implement a lobby plan, and engage an experienced lobbyist whose role is to promote and protect the interests of the challenger with key regulators and corporate watchdogs. Presenting a united front with other competitors has the advantage of greater pressure being able to be applied and shared cost between multiple parties.
 
MARKET LEADER COMPLACENCY.
The biggest threat facing market leaders is when they start to believe that they are as good as their market share reports, and they become complacent about their leadership. Complacency leads to an assumption that leadership cannot be lost – but a quick comparison of Fortune 500 Lists over the years shows history proves over and over that this is not the case. Complacent leaders ignore shifts in what consumers want or perceive, usually to their own demise.

A complacent leader does not respond immediately to competitive threats, in fact, it may not respond at all until it is forced, but timing is critical in marketing. If the market leader waits too long, it gives the challenger enough time to grow strong and, once this occurs, the leader is less able to effectively respond to the competitive threat.
 
READ: How Challenger Brands Attack – Part 2 and How Challenger Brands Attack – Part 3.
 

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