According to Wikipedia and taken from a variety of business books and articles, “A challenger brand is a brand in an industry where it is neither the market leader nor a niche brand. Challenger brands are categorized by a mindset which sees they have business ambitions beyond conventional resources and an intent to bring change to an industry.”
Additionally, an establishment brand is the antithesis to the challenger brand, the market leader being the primary example of an establishment brand.”
The Wiki information page alerts us to the fact that the challenger brand concept appeared in 1999 by virtue of Adam Morgan in his book, ‘Eating the Big Fish.’ Mr. Morgan identified “… three specific challenger brand criteria: 1) state of market: the brand is not a market leader nor a niche brand; 20) state of mind: the brand has ambitions beyond conventional marketing resource; and 3) rate of success: the brand has experienced significant and rapid growth.”
Challenger brands thumb their noses at conventional wisdom, accepted definitions, what has worked in the past, entire industry cultures and the status quo.
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Basically, a challenger brand is a brand that dares to makes changes that other brands cannot or will not make. A challenger brand takes on seemingly impossible obstacles. A challenger brand is provocative in its purpose and promise. A challenger brand disputes current beliefs. A challenger brand opposes the existing states of affairs, the marketplace, landscape or business category in which a brand operates. A challenger brand is competitive, aggressive, confident and exciting.
And, so the woes of the big brands, Nike and Adidas. Leading in size – being big – is good. But, a brand must lead in popularity as well, being perceived as innovative and conveying an appealing identity.
According to The Economist, Nike and Adidas have not only been challenged by outsider brands like On and Hoka, but have committed strategic mistakes including “making a mess of their distribution.” A focus on direct-to-consumer sales allowed retailers to stock shelves with these new competitors.
Data show that Nike’s shares have dropped by 27%. Combined, Nike and Adidas sales fell 63% from highs in 2018.
The Economist refers to On and Hoka as challenger brands. But, the magazine’s use of the phrase “challenger brand” does not go far enough in describing just how powerful a challenger brand can be. Of course, it helps when your competition is self-immolating. Nike And Adidas provided ample space for the challenger brands to fill. However, the problems with Nike and Adidas must not diminish the extraordinary accomplishments of On and Hoka, both driven by the challenger mindset.
Hoka and On are a brand-and business-based David and Goliath story.
Apparently, Nike and Adidas are up close and personal with this: “Challengers are gaining ground including established brands like New Balance and Asics as well as new ones like On and Hoka.” The barrier to entry is not that high: “Booming demand for trainers (the UK term for sneakers) has given challengers an opening. Low barriers to entry have helped them seize it. Social media have made it easier to establish a running brand….”
Further, the challengers are hitting Nike and Adidas using innovation.“ Hoka sells with comically high thick soles. Hoka has turned ugly into impressive. On’s latest superlight marathon shoes are made by a robotic arm using a single piece of thermos-plastic fibre.” The backstory is that On’s founder used garden hose as soles to make a triathlete’s shoe.
Observers including analysts say that Nike is no longer an R&D leader. And, Adidas is now relying too heavily on its variety of fashion-style sneakers. Established brands sometimes fear making changes, relying on what worked yesterday to create profits.
Just to spice up the competitive options, The Wall Street Journal reports on Skechers as challenging not only Nike but even the challenger brands, Hoka and On. Skechers identified a target market in which neither the established brands nor the challenger brands have any interest. “Nike has superstars. Hoka has tapped into hardcore runners. Tech bros are willing to pay up for On shoes. Skechers thrives on retirees looking for comfortable kicks and families looking for something more affordable for their children.”
Having said this, The Economist does indicate that both Nike and Adidas are taking note and, albeit belated, actions. While Nike and Adidas focus on revitalization, the challengers brands are moving ahead with fashion-style-oriented shoes of their own, where the profit margins are higher.
The financial newspaper, Barron’s, indicates that Nike has signed a new deal with Academy Sports & Outdoor, an outdoor and athletic goods retailer. Academy Sports & Outdoor is a lower-cost option than Dick’s Sporting Goods. Nike, which has made some serious mistakes with its distribution, has now signed a partnership deal with Academy. Having said this, Barron’s does state that investors are hopeful Academy will soon carry Hoka and On.
It may turn out that these David brands fall into the same trap as the Goliath brands they are currently slaying. These insurgent brands are only nimble because they are dancing rings around the big brands. But big brands can be nimble as well. Size is not the issue: mindset is. And there is nothing like being at the edge of a cliff to generate creative ways to keep from falling.
There are those who still say that brands can be big or brands can be innovative, and that it is not possible to be both big and innovative. They say that Goliaths cannot be nimble.
These same naysayers state that when a brand becomes big, it becomes cautious and risk-averse. They repeat that when brands are big, brands can be slow, inward-looking, and not creative. But, those who say you cannot be big and innovative are wrong. Big Goliath brands can show the world that they are innovative.
Big brands can use their size and strength to make changes of magnitude. Because of their size and strength, big brands like Nike and Adidas have the opportunities to be better and to be greater. Big brands’ size and strength allow the acceptance of risk and offer the ability to resist adversity. Size and strength give big brands a greater variety of talent upon which they can draw.
Big brands’ size and strength make them a company of opportunities. Yet, as has happened, size and strength are meaningless if brands do not leverage the benefits that come from size and strength.
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Product and service innovation is not the sole property of the small, agile companies, start-ups, or entrepreneurs. Those who say that you cannot be both big and innovative are wrong. Those who say that giants cannot be nimble are wrong. It is a management choice to become cautious and risk-averse. They have a lot to protect. Small, entrepreneurial companies have no choice. They must take risks to grow.
Big brands can become challenger brands. It takes a mindset change and the ability to reallocate resources. Here are 5 things big brands can do to break the bigness barrier and become brand brawlers.
- Change the new product/new service development process to start with consumer-needs-based/problem-solution-based occasion-driven innovation.
- Understand customers so well in order brands can anticipate unexpressed yet unfulfilled customer needs and problems.
- Stop selling what the brand knows how to make. Start making and selling what customers will want to buy.
- Institutionalize change. Change the mindset to being a challenger mindset: as a big brand it is no longer a leader, but it is not a niche brand.
- Continuously renovate and improve existing brands. Brands are dynamic, active promises. Product and service brand innovation is lifeblood for brands.
As The Economist ends its story, “Trainer Wars,” the sentiment is that Nike and Adidas, now motivated and focused may yet win the trainer (aka sneaker) wars. “The challengers may yet lose their footing.”
Contributed to Branding Strategy Insider by: Joan Kiddon, Partner, The Blake Project, Author of The Paradox Planet: Creating Brand Experiences For The Age Of I
At The Blake Project, we help clients worldwide, in all stages of development, define or redefine and articulate what makes them competitive at critical moments of change. Please email us to learn how we can help you compete differently.
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