What are Challenger Brands?
Conventional wisdom tells us that starting a new brand is hard because the big guys will eat you up. Big companies like P&G, Nestle, General Mills, etc. have well-known brands, established retailer relationships, and big budgets. In other words, they can throw their weight around. So then why do we keep hearing about all these new challenger brands that are disrupting categories and winning market share? How are these new brands able to break out and win when the odds are stacked against them?
First, what is a challenger brand? A challenger brand is an emerging brand that has built up enough momentum to start stealing noticeable market share from existing market leaders. A challenger is also usually changing the expectations for the category by introducing a new benefit.
For example, when I worked on Windex®, we were the market leader and our main competitors were Private Label, as well as some other smaller cleaning brands that for the most part offered similar product types, forms, and benefits. The challenger brand for the category was Sprayway®, which introduced foaming aerosol cans instead of the traditional spray bottle, and slowly built market share to 10-20% of the category. Each year they grew distribution and sales — first at the expense of smaller, underperforming players, but soon they started stealing space from Windex®. They were not just a new ankle-biter anymore, they were a real threat to growth and category leadership.
Why care about challenger brands? Challenger brands are the disruptors who change category norms. In the prior example, Sprayway® delivered a new experience which hit on a consumer pain point for window cleaning (the dreaded drips of window cleaner that you rush to catch with a paper towel). By growing to the point of stealing share from the big players, challenger brands force the market leaders to step up their game. They can no longer ignore the small-er player as insignificant, because that player is resonating for a reason. In response, big brands will revamp existing products or launch new products with similar benefits to the challenger brand, which accelerates the adoption of new trends. Just look at the plant-based movement — this started with some (initially) smaller players who built enough of a following that the big brands started introducing plant-based options. Now plant-based is everywhere.
So how do challenger brands compete with big brands? You double-down on what’s been resonating with your core consumer.
You know the saying “he’s more afraid of you than you are of him”? Well it applies here.
There’s many reasons big brands have trouble boxing out challenger brands:
There are lots of emerging brands — it used to be that the “big fish ate the small fish”. Now there are so many small fish that they are together eating away at the big fish’s market share. And it’s hard for big brands to know which to defend against.
Emerging brands can reach consumers more easily than before — DTC, social media, and new advertising platforms mean brands don’t have to have a store presence or TV budgets to reach consumers.
Big companies are generally focused on profitability over growth — in the classic “Innovator’s Dilemma”, the priority goes to the profitable big brands in an organization at the expense of developing and nurturing new ideas. Big companies also have high margin expectations, so over-investing to protect space or launching new products to match emerging trends is hard to justify.
Big organizations are slow & bureaucratic — there are often lots of steps and decision-makers involved in a new product launch. Though big companies try to be nimble, there is so much process in place that it is hard to move fast.
Big brands struggle to authentically replicate new benefits — if a challenger brand brings a new benefit to a category, why can’t the big brands just launch new products that have those same benefits? Not that easy. The challenger brand’s equity is usually centered around that new benefit— it’s what they’re known and celebrated for. And if that benefit doesn’t naturally fit with the existing equity and focus of the big brand, then consumers (and often retailers) won’t accept the big brand just slapping that benefit onto a new product. It’s inauthentic and undifferentiated.
So how does one become a challenger brand? How do you break out from the crowd? It takes a lot of time, energy, passion and luck. But don’t worry about the big brand squishing your dream. They’ve got bigger fish to fry.
