Posted on 02 August 2009.
In Part 1 How Challenger Brands Attack, we looked at what constitutes a genuine challenger brand and what advantages they enjoy. Then in Part 2, we looked at strategies they deployed and the best time to launch an attack.
In Part 3, the final chapter, we are going to dive deeper into challenger brand strategies. We’ll take a closer look at attacking the leader’s point of weakness, the importance of the element of surprise, establishing brand credentials, the full-frontal attack, guerrilla warfare, the Pincer Move where a challenger encircles the leader and flank attacks.
Attacking a Market Leaders Point of Weakness.
One of the essential factors in launching any challenger assault is to attack a market leader’s point of weakness. To maximize this, several factors have to support the challenger.
Hard to defend weaknesses. The weakness has to be such that it is difficult for the market leader to defend or respond, or the leader is disinterested in responding since it deems the territory unimportant.
Attacks must be focused on the weakness. The challenger should not scatter its energies. While a challenger is unlikely to have the resources required to attack on a broad front, attempting such a move will almost certainly accelerate a response from the market leader.
The best attack has the element of surprise. The challenger should seek to gain as much territory as possible without being contested. Once the sleeping giant awakens, the challenger should be prepared for the battle to be sustained over time. Odds need to favour the challenger winning market share and thereby weakening, even subtly, the market leader.
If the above factors are not on the side of your challenger brand, take your plan of attack back to the drawing board.
Strategies Challenger Brands Deploy.
The challenger must always offer a genuine alternative to the market leader or be at least perceived to be in that position. This doesn’t mean the product has to be identical (it is better if it is a bit different), but once comparability is established in the minds of consumers, a challenger may use one or more of the following strategies to force the hand of the leader.
Establish Brand Credentials.
For any business selling goods or services, including charities and not-for-profits dependent on donations, and irrespective of market position, establishing brand credentials is a fundamental building block of marketing strategy.
Brand credentials provide the basis for confidence, a belief in the brand and they speak of a commitment to the customer. This reassures the buyer that purchasing a product carrying that brand name is safer than purchasing an unknown alternative.
Using the brand and its positioning to create appeal.
For the majority of successful challenger brands, a central theme permeates marketing messages, with the basis of these themes usually emotive. The themes are designed to resonate with the buying public and to provide it with a reason to switch from the market leader to supporting the challenger. Common challenger themes might include:
• The maverick – or anti-establishment – brand.
• The underdog.
• David versus Goliath.
• The champion of the people.
Of course, brand themes are not limited to the somewhat romantic view of David slaying Goliath. A brand theme may be influenced by the market leader. In particular, as was the case for Pepsi and its position as the cola for younger drinkers, Pepsi’s theme came into fruition by positioning itself as the opposite to the market leader.
Some challengers, such as Virgin, apply a human face (Sir Richard Branson) to the challenger. Some argue that it enables brands to connect better with people since it makes the brand feel real and authentic. This may be a useful strategy if the market leader does not have a human face to its brand and so a challenger can become the face of the industry, but it carries risk as well. Some of these risks include:
- Negative press of the human face (the personality) can have a detrimental effect on the brand by association.
- A personality too closely aligned with a brand may make the brand less attractive to a buyer in the event the business is sold.
In developing a branding theme, a challenger should consider:
- Ensuring it is different from other competitors, including the market leader;
- Inclusion of a positioning statement as a slogan;
- Decide upon one brand strategy to dominate marketing – and remain consistent with it.
The Head-To-Head Full Frontal Attack.
To undertake a full frontal, head to head assault on a market leader, a challenger needs to be extremely well resourced and have the element of surprise on its side. A full frontal assault of this nature is generally rare in marketing since it may be extremely expensive to undertake and usually fails. The market leader redeploys its resources in preparation of the assault and the challenger finds itself attacking strength not weakness.
This strategy may be considered if:
- Brand equity and customer loyalty is low.
- The market leader has few or limited resources.
- The challenger has strong resources.
- Products have little or no difference.
A more common execution of a full frontal attack is a softer version of it, driven by a price push from a challenger to force the market leader to reduce its prices. (A high price is not always a sign of a market leader vulnerability since a market leader may easily be able to drop prices and still return a healthy margin.)
Attack the leader through a more aggressive pricing strategy.
One common challenger strategy is to attack using a price point that sits 10-15% below the market leader. For many categories, a modest price percentage reduction still returns a healthy gross profit margin, but a pricing edge may give the challenger a story to tell.
The effect of this strategy is to take price-sensitive consumers, or consumers that believe the product is homogenous and therefore does not justify a premium price, from the market leader.
If the challenger is successful at winning custom, eventually the leader will reduce pricing because it wishes to retain market share. The challenger can accept the credit for forcing category price reduction. Consumers think the challenger has acted on behalf of the people – and this creates challenger brand goodwill and loyalty. On the flip side, the market leader looks like they have robbed their customers through using market dominance to charge high prices.
Price driven strategies need to be applied with great caution to avoid price warring. A market leader is usually better able to discount prices for longer than a challenger. The challenger must fully understand the market leader’s margins, and its own costs, prior to implementing price-driven strategies so as to avoid finding itself in a financially precarious position.
The Pincer Movement, Encircling the Leader.
As discussed in the What Market Leaders Do, this strategy involves encircling the market leader through the introduction of products that are similar to the market leaders. Segments are targeted, products are taken to them, and market share gradually acquired from the market leader. This strategy is best executed in stealth so as to avoid a head-to-head full frontal confrontation.
Challengers are overt attackers, but they can start out using stealth.
The market leader knows that the challenger is attacking them. They may, however, not realize it at first. Challengers may start building their ability to seriously challenge through using stealth.
Stealth occurs when a challenger moves in such a way that is not obvious, or is less visible, to market leaders. For example, if a market leader is strong because it dominates metropolitan supply, a challenger may move to secure regional supply, quickly and quietly accumulating market share. The growth of market share from an alternate source enables the challenger to become strong, without directly competing with the market leader and thus attracting its immediate attention.
The objective with this strategy is that, by the time the market leader realizes that the challenger is strong, it is too late. The challenger has the resources to enter into sustained combat with the Number One brand.
Assaulting the Sides – The Flanking Attack.
This strategy, also a niche market strategy, involves competing for a market segment or geographic region that the market leader does not consider to be important. Because it is not critical, the market leader will be unconcerned so is less likely to respond to competitive activity.
Most flanking attacks include the following elements:
Advertising and promotional campaigns to specific segments or territories.
Product customisation to suit specific needs.
The flanking strategy, in some form or another, is one of the most popular of challenger strategies. Since many markets are well-segmented, and market leaders may be large so less able to serve niche markets, it offers opportunity for smaller competitors to secure market share, some of it very profitable. To be able to undertake this strategy, the challenger needs to have sufficient resources to defend its niches from smaller competitors that want to acquire its market share.
Guerilla warfare is best described as the tactics employed by smaller forces against larger, better resourced forces. As in the military, in a business context, guerilla warfare often relies on isolating smaller units of the larger force so as to attack larger force by ambush. The attacks are designed to tire the market leader, exhausting them to the point that they move to other markets.
Guerillas avoid mass confrontation, operating instead in small pockets that are hidden from immediate view, perhaps moving around frequently to avoid detection. A typical guerilla assault includes some level of propaganda to win over the public. In a high level strategic context it may have one of two objectives:
- Inflict damage on the market leader, then leave before the leader can retaliate or
- Guerillas may enter a market to take advantage of abnormal profits and then leave as quickly as they entered.
The principles of Guerilla Warfare are:
- Never engage the enemy in a battle you cannot win. Look for areas that are not well defended and don’t step outside the territory you know.
- Always strike fast and use every weapon at your disposal. You should aim to inflict the greatest amount of damage possible before exiting quickly.
- Always plan your escape before you enter an assault.
Make every attack count towards your objective. A Guerilla’s advantage comes from being the opposite to its larger opponent. While large opponents:
- Require many supplies, small guerillas don’t.
- Seek to dominate the people, small guerillas seek to win over the support of the people.
- Move slowly, smaller guerillas are extremely flexible and agile.
- Tend to be sloppy due to mass, smaller guerillas have tighter operatives.
- Leave big footprints in the market, it may be hard to see where a small guerilla is active.
- Struggle to communicate, small guerillas don’t. Their left hand knows what the right hand is doing.
Changing the Name of the Game.
The truly exciting, but high risk strategy is one that changes the way the game is played. The outcome of this is usually a product, service or way of doing something that is disruptive to an industry. This is by deploying a disruptive technology.
In an overcrowded market with too many me-too products all claiming the same thing, the surest way to get your brand noticed is to change the name of the game through the deployment of a disruptive technology.
Skype did it to the large telecommunications giants. Google did it to Yahoo! (and to the publishers of paper-based directories such as Yellow Pages). The Microwave did it to conventional ovens. Digital cameras did it to Kodak. These are products launched that fundamentally changed the way people did things. In the process, they disrupted entire traditional industries.
(Check out future posts about The Innovators for more on this strategy.)
Want some extra reading on Challenger Brands? Try Adam Morgan’s Eating the Big Fish.