Let’s first start by defining the term “challenger brand”. You may have heard the term tossed around on your favorite morning news program or maybe you’ve seen a headline online while killing time in between meetings.

A challenger brand is any brand, company or product that is not a leader in its category. That technically qualifies a lot of companies. It also qualifies any NEW market entrant that is not yet in market, since they are starting from a market share position of zero. 

So, whether you’re a 30-year-old company that’s looking to make moves or you’ve got the next wildly successful and flavorful milk alternative made from some obscure tree nut in the Amazon, pay close attention.

Here are 6 things to consider when launching a challenger brand.

 

1. Do you know your market?

This may seem like a stupid question, but do you REALLY know your market? What makes it tick? How large is the overall market?  How large is your segment within the overall market? What is the expected compound annual growth rate (CAGR) over the next 10 years?  How do people feel about your competitors?  Do you understand the risks associated with being a challenger brand?

There’s a lot of data to consider that should be used to help inform decision making, packaging, brand positioning, messaging, marketing strategy and even the product itself.  I’m sure you know your business, but knowing your business and knowing your market are two different things.

If you don’t have the time to spend diving deep into this kind of data, you might as well be shooting blind.

 

2. Are you willing to pay for research?

There is a lot of free research out there that can easily be found through Google, Bing or whatever other search engines you may use. But the really good stuff? That’s going to cost you. Market research firms have developed robust, scientific processes that are able to provide incredibly insightful quantitative and qualitative data.  It even sounds expensive.

When you consider the fact that 80%-90% of challenger brands FAIL, having a strategic plan backed by comprehensive research is your best bet to reducing that risk of failure. If you don’t believe me, here’s a quote from Susan Viamari, VP of Thought Leadership for IRI: “What we’ve found is companies are more strategic about their innovation and putting more (investment) to concept testing and focus groups to make sure” a product launch resonates. IRI is a leading data and research company that helps CPG, retail, over-the-counter health care and media companies grow their business. 

 

3. What is your customer’s journey?

Understanding the customer journey is critical to your success. What you should really be after is learning where, how often and why people buy the thing you’re selling. Is your product bought in the supermarket, pharmacy, or online? Is it purchased once a week, once a month, once a year? Do people tend to do a lot of research before purchasing your product?

Understanding the Customer Journey

As a challenger brand, it is safe to assume that everyone’s awareness of you is zero. If you’re the 30-year-old company that lags behind the market leaders, your awareness score is likely (hopefully) higher than zero. Obviously these two scenarios will require different pre-purchase awareness and consideration strategies.

Essentially, you need to figure out a way to break the buying habit of your target market.  How are you going to grab their attention? What is going to make them break their habit?  Understanding your customer’s journey will help you begin to answer these questions.

 

4. Does your brand strategy make sense?

Knowing your market, collecting useful research and understanding your customer’s journey should paint a nice, pretty picture for you about your brand strategy. You’ll have a more informed brand position, visual brand identity, packaging design, packaging messaging, brand voice and marketing strategy, all of which are critical to the customer’s final purchase decision and on-going loyalty. 

There is a heavy amount of strategy work that goes into successful brand strategy development. Colors, tone of voice and types of imagery convey to the customer who you are, what you’re about, and can have subconscious impact on brand perception. All of this should align to your businesses mission, values and objectives. Put another way, there’s a really good reason most fast food chains use red in their branding. 

 

5. Is your Year 1 sales goal realistic?

With the right research, you should be able to learn what a realistic Year 1 sales goal is for your product.   A Year 1 sales goal is the amount of revenue you set to target for the first year your new or improved product is made available for sale. This exercise assumes you will not be one of the 80%-90% of newcomers that fails. 

Setting a realistic sales goal should take in to account a variety of factors like over market size, historic sales of competition, market share by competitor, your production and distribution capacity and historic challenger brand first year sales performance. The latter will be different for each market and category, so as before, good research here is wise. 

In the non-food consumer-packaged goods (CPG) space, you might be surprised to learn that of the successful challenger brands (that’s the 10%-20% that DO NOT fail), only 20% had sales figures UNDER $10 million. Make sure you don’t sell yourself short!

 Year-One Sales Distribution Chart

 

6. Does your Year 1 marketing budget make sense?

Now that you’ve got a realistic sales goal, you should be able to carve out a marketing budget that makes sense.  After all, competing in a crowded market of established brands is going to require you make some noise and making noise costs money (save for the very tiny few who strike gold and go viral). 

I like to think of it this way.  You need to grab people by the shoulders, shake them and say “Hey, look at me! I’m here!  Buy me instead!”. 

How many times do you need to do that to reach your realistic sales goal? What marketing tactics will you want to leverage to reach your customers? Will you be able to manage those tactics yourself, or will you need support?

First step is to look at your margins.  Are they healthy?  Good, dedicate more to marketing.  Razor thin?  That’s ok, but you should still a healthy budget if you want to hit the sales goal.

 

Limit Your Risk

 

Deciding to launch a challenger brand is inherently a risky endeavor. Instead of dipping your toes in the water out of fear of failure, think about investing more upfront into research, strategy and marketing to INCREASE your chances of success.  After all, if you think something is worth doing, shouldn’t you go all the way?

Think you need some help getting there? We’re all ears.

Kyle McFarland

About Kyle McFarland

Kyle is a Business Development Strategist at Liquid Interactive. Kyle works with current and prospective clients to solve complex business, marketing and technical challenges by developing strategic and creative solutions.