The challenger brand phenomenon isn’t new, but it’s definitely accelerating. Today, across almost every category you look at, challenger brands are on the march.
In part, this is because structural changes in retail and media have dramatically lowered barriers to entry. Whilst this has given challengers a significant leg up, it doesn’t explain why consumers are embracing them with such enthusiasm. Challenger brands aren’t just winning market share – very often, they’re winning the market argument too.
To understand why, let’s define precisely what a challenger brand is. Adam Morgan, an expert on the topic and author of the seminal ‘Eating The Big Fish’, puts it well:
“A challenger brand is defined, primarily, by a mindset – it has business ambitions bigger than its conventional resources, and is prepared to do something bold, usually against the existing conventions or codes of the category, to break through.”
These points about mindset and ambition are fundamental. Challenger brands believe they can change the weather by overturning category norms. And they marry belief with behaviour. At every level – values and personality, product design, channel strategy, service delivery, customer experience – they display complete coherence and absolute conviction. They jump on insight to identify a point of resonance, then focus on it with ruthless obsession.
How can established brands fight back? To challenge the challengers effectively they need to adopt more of this mindset. They need to re-set their ambitions, re-discover their conviction and turn both into new behaviours and actions that channel the positivity and energy of the challengers. To a very large extent, they need to re-invent themselves.
Some companies have already set off on this road. Diageo is buying brands like Seedlip and allowing them to operate autonomously in order to inject a shot of challenger DNA into its corporate bloodstream. Others are radically overhauling their brand behaviours: as Heineken has shown with Strongbow Dark Fruit and to a degree PepsiCo with Pepsi Max, re-invention is possible if we listen closely to consumers and unearth true insights into their wants, needs and preferred ways of engaging.
The Axis Shifts
Today, even the longest established and most famous FMCG brands are under intense pressure. Over decades, these brands have been massively successful at carving out a role in people’s daily lives. They have been highly effective in leveraging their scale advantages via globalisation, ubiquity of distribution and weight of advertising. They have been masters of the marketing game as it has traditionally been played. Now the rules of the game have changed. The landscape is being redrawn by several inter-connected factors.
Firstly, the structural. Dramatically lower barriers to entry, the emergence of ‘new’ retail and re-prioritisation within traditional retail are all having an impact. Secondly, attitudinal factors. Different consumer expectations, an appetite for experimentation and scepticism about traditional elites – resulting in dramatic changes.
Whilst there has been a levelling of the playing field, resource constraints are still a significant obstacle for challenger brands. Whilst crowd-funding represents a shortcut to capital, challenger brands lack the firepower of established brands in terms of depth of personnel and infrastructure, manufacturing capacity to scale up quickly and funds for ongoing, mass-market promotion.
But what challengers lack in capital, they make up for in conviction. They have the ability to translate strongly held beliefs into strongly attractive behaviours, due to some intrinsic advantages.
- Because they start with a clean sheet of paper and carry no historical brand baggage, challengers can zero in on unarticulated or emerging consumer/customer needs.
- Their product development can be highly considered and laser-focussed on addressing that key need.
- They can design the customer experience from the ground up, ensuring every element of the offer supports the core value proposition.
- They can pursue the distribution strategy that best fits their model and proposition. They are not slaves to historic trading relationships, ways of working or other entrenched interests.
- At launch, challenger brands rely on making an exaggerated impact on a limited number of people. Because they do not have to please multiple constituencies, they can be more dynamic and take more risks in how and where they communicate.
- If necessary, they can refine their offer quickly. Compared to most established brands, they are not burdened with cumbersome decision-making hierarchies, so they can be nimble in responding to changing circumstances.
In short, challenger brands have the luxury of positioning themselves in opposition to the category norms and expressing that opposition through their values and behaviours. The present shift in consumer attitudes gives them an unprecedented opportunity to overturn the status quo.
Learnings for Established Brands
In order to get under the skin of this issue, we commissioned quantitative research amongst over 1,000 people who had recently switched from a big, established brand to a new challenger brand. The research looked at eight FMCG categories – from food to beauty to household products. The research showed challengers are disrupting every category we examined.
In order to fight back, established brands need to make changes at the product level. Quality standards must be maintained or enhanced. NPD must be prioritised, even at the risk of cannibalisation. And brands must dig deeper to find authentic, resonant product stories.
Changes are also required at the emotional level. Architecture may need to be re-framed; certainly, behaviours will need to be re-invented in order to convey true conviction. Stories should be built from the ground up, encouraging people to re-discover the brand for themselves. And the narrative must be opened up for audiences to play with and shape.
To put it simply – in order to compete effectively, established brands need to adopt more of the challenger mindset. They must find a guiding conviction of their own and re-organise themselves around it. All of this requires bravery and a much greater appetite for risk. But in order to challenge the challengers, established brands need to match their sense of ambition and conviction.