The California State Fair Wine Competition
is billed as “the oldest, most prestigious wine competition in North America.” Established in 1855, it is the place where wineries have their carefully crafted pedigrees validated or refuted. Such was the case for Charles Shaw Chardonnay
in 2007 when it bested 350 other entries and earned “Best of California” and “Best of Class.” A remarkable accomplishment in its own right, it was made even more so because Charles Shaw, or “Two Buck Chuck” as it is affectionately known among its fans, is the brand that established the “super value” category in the wine industry. A bottle will set you back $1.99. Two Buck Chuck waxed a field of competitors selling for as much as 25 times its own retail price.
“We choose to sell good quality wines at $2 a bottle because we think it’s a fair price,” said Charles Shaw’s Fred Franzia
in an ABC News article. Franzia democratized fine wines by focusing on stridently pragmatic operations. His bottling plant is a model of production efficiency tucked into an industrial-looking area near Modesto, California, which is located more than 100 miles from the windswept estuarine flats that are home to the genteel vineyards of Napa Valley
Franzia’s story illustrates perfectly the ethos of the underdog—or the challenger brand. Three factors distinguish challenger brands from leading brands. In his book, “Eating the Big Fish
,” marketing strategist Adam Morgan identifies two of these factors: state of market and state of mind. We add to Morgan’s two factors a third we call state of readiness.
State of Market
State of market refers, of course, to a company’s position in the marketplace, or more specifically, its category. Charles Shaw Chardonnay is far from the best-selling Chardonnay in terms of units sold, and at just $2 per bottle, the company isn’t leading the pack with respect to revenue generation, either. Challenger brands are never traditional category leaders. They may be large companies in their own right, but number one they are not. Franzia has sold more than half a billion bottles of Charles Shaw Chardonnay. Still, the company is not the biggest fish in its pond. Challenger brands like Charles Shaw don’t enjoy the seemingly endless resources of category leaders. Their working motto, “Don’t outspend the competition, outthink them.”
State of Mind
Challenger brands are either the best at something important to a specific group of customers, or they are actively striving to become the best at delivering something their customers want. Charles Shaw is the best at delivering a very inexpensive bottle of premium quality Chardonnay. Nobody does it better, as verified by the impartial judges at the California State Fair Wine Competition. The importance of organizational orientation toward excellence cannot be overstated for challenger brands.State of Readiness
The final challenger brand distinction is perhaps the most important of the three. True challenger brands engender a corporate culture of willingness, openness, and energy for embracing new modes of thinking. This includes a higher organizational tolerance for calculated risk-taking. Often, this culture is present early in a company’s lifecycle
but may wane as the company matures and modes of thinking become traditionalized. It can be reignited during an organizational inflection point, such as a leadership change, or an intentionally and effectively managed reengineering process. But, regardless of origin, the company’s collective mindset must embrace alternative ideas. Instead of following the practices of competitors in Napa Valley, for instance, Franzia organized his company around a more industrialized model that prizes efficiency and speed over mystique and tradition. In essence, Franzia rewrote the rules of the industry so his company could win. This is a classic challenger brand move.
At this point, it is useful to elaborate briefly on the corporate culture necessary for fostering challenger brands. We call it the “challenger culture” because it is typical of challenger organizations. While there is great variety in corporate cultures even among challenger brands, in our experience these companies share some important cultural traits: an organizational commitment to excellence, purposeful ambition, and most importantly, a pervasive sense of willingness. Each of these traits feeds the company’s state of mind and state of readiness.
Advertising the Challenger Brand
Being a challenger brand and selling a challenger brand are two different issues. Marketing and advertising challenger brands requires significant leverage of a company’s state of mind and state of readiness in a manner that changes the environment to the advantage of the challenger. Specifically, challenger brands must accomplish the following:
1) Challenger Strategy: Challenger brands must devise a marketing strategy that challenges category conventions and does not simply mimic the moves of the leader or other successful category competitors. Often, the marketing strategy is rooted in a business strategy that is built around challenging conventional category thinking, as is the case with Charles Shaw. Franzia conceived and executed an entirely different business model than his competitors in Napa Valley. Leadership teams for authentic challenger brands like Charles Shaw evaluate the competitive landscape with an eye toward changing something fundamental about the way they approach the business. In doing so, they create a new and distinctive competitive advantage. When this is accomplished successfully, it creates a new path for a unique marketing strategy. Franzia certainly could have marketed his Charles Shaw brand the way the category competitors do, but he would have missed a significant opportunity for category distinction.2) Challenger Promises: Challenger brands must make brand promises that aren’t easily duplicated by competitors. The promise must be solidly grounded in real differences created by the company’s state of mind—something it does best or is striving earnestly to do best. This promise must be authentic. It cannot simply be manufactured through advertising. The authentic difference for the Charles Shaw brand is not that it is an award-winning Chardonnay. The distinction is the company’s ability to sell it profitably for $2 a bottle, and its willingness—even desire—to do so. That distinction cannot be invented through marketing or advertising, although it creates a significant opportunity that can be leveraged strongly through clever marketing and advertising. Franzia was able to use this authentic difference to do something many challenger brands do—he created an entirely new category of wine.3) Challenger Statements: Challenger brands must be willing to make clear and compelling statements about what they are and what they are not, who they are for and who they are not for. Famous challenger brands such as Red Bull, Southwest Airlines, and Motel 6 are very specific about what they have to offer and who they are for. They are also not afraid to clearly position themselves away from other customer groups. For instance, Red Bull is not for ladies having a soda over lunch. Southwest Airlines is not for people who like to fly first-class. Motel 6 most assuredly isn’t for the traveler who wants something more than a clean room at a great price. And Two Buck Chuck clearly isn’t aimed at pleasing wine connoisseurs who favor the traditional practices of mainstream California vineyards. Challenger brands are not afraid to limit their appeal to those who will love them at the expense of alienating those who will merely tolerate them. The benefit for the challenger brand is a fervently loyal core customer base.4) Challenger Voice: Challenger brands are willing to amplify their strategies, brand promises, and statements through a unique voice. Their advertising and marketing communications look and sound different from their competitors. They say different things, make different promises, and command a different kind of attention in the marketplace. The state of readiness extant in challenger brand leadership not only paves the way for unique and unconventional marketing and advertising, it compels them to seek it out.
Teaming Up With a Marketing Partner
Challenger brands often don’t recognize themselves as such. American business culture is consumed with leading and being first, and many companies don’t readily recognize or appreciate the inherent advantages of a strongly positioned “following brand.” Often, a marketing partner’s first role is to help frame the context so client leadership recognizes itself as a challenger and begins to understand the significant power in that position. A discussion about the concepts identified in this paper serves as the starting point for clarifying the status of the company’s state of market, state of mind, and state of readiness for tackling the market as a true challenger brand.
Finally, when evaluating a marketing partner to help develop and leverage a challenger brand plan, it is important to identify a resource that also fully appreciates and embraces the challenger brand ethos. The firm’s own culture should reflect the state of market, mind, and readiness exemplified by a challenger brand as articulated in this paper. Look for a firm that has the disposition and specific tools and processes in place for developing a challenger plan.