Three States That Define Challenger Brands

As we continue our discussion about what is and is not a challenger brand, here’s a hint: market position is table stakes. By strict definition, the only brands that aren’t challenger brands are market leaders. Of course, that’s an awfully unimaginative definition, and imagination is a hallmark trait of true challengers. I’ll continue the illustration started in my last blog using our example of Charles Shaw’s Two Buck Chuck to talk about what truly separates challenger brands from the field.

State of Market

State of market refers to a company’s position in the marketplace or, more specifically, its position in its category. In the more than $62 billion U.S. wine business, Charles Shaw Chardonnay is far from the best-selling Chardonnay in terms of units sold. And at a selling price of just $2 per bottle in 2007, the company wasn’t leading the pack with respect to revenue generation.

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, but they are not the biggest fish in their pond. What they are is a brand with a “culture of ambition.”

Challenger brands like Charles Shaw don’t enjoy the seemingly endless resources of category leaders. Instead, they choose to “outthink their competition rather than outspend them.” 

State of Mind

State of mind refers to a company’s understanding of who they are. Challenger brands are either the best at delivering something important to a specific group of customers, or they are actively striving to become the best at delivering something their customers want. Now, 12 years after their win at the state fair, Charles Shaw is still one of the best at delivering a very inexpensive bottle of premium quality Chardonnay. In the past decade, other brands like Yellowtail and Barefoot have successfully joined that space with more brands showing up every month.

But in 2007, nobody delivered affordable quality better than Charles Shaw, as verified by the impartial judges at the California State Fair Wine Competition. And yet, their immediate reaction to schooling Napa Valley was not to quadruple protection, or to expand distribution from Trader Joe’s to every grocery store from California to Maine. Charles Shaw knew who they were and, in great part, that’s why they are still excellent.

State of Readiness

The final challenger brand distinction is perhaps the most important of the three. State of readiness refers to how prepared a company is to go to battle. You can know where you stand and who you are, but without the readiness and willingness to act, to compete, to take a chance, and to move forward, you might as well be paralyzed. True challenger brands engender a corporate “culture of willingness,” an openness and an 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.

Again, consider Charles Shaw. Instead of following the practices of competitors in Napa Valley, Fred Franzia organized his company around a more industrialized model that prized efficiency and speed over mystique and tradition. In essence, Franzia rewrote the rules of the industry so his company could win.

That is the quintessential challenger brand move. Before Starbucks was Starbucks, it was a single coffee shop in Seattle. A few years ago, Tesla was a figment in Elon Musk’s brain. Chick-Fil-A was a mall food court mainstay that only sold chicken. Just a little more than a decade ago, the iPhone didn’t exist. To paraphrase Apple’s wonderful “Think Different” commercial from a few years back, the companies that are willing to take calculated risks and believe they can change the world are the ones who do.

And One More Thing, It’s Really All About Your Culture.

We see it over and over again. The catalyst for challenger brands is the culture their leadership creates. We call it the “challenger culture” because it is typical of challenger organizations. While there is great variety in corporate cultures even among challengers, in our experience, challenger brands share some important cultural traits that allow them to punch above their weight including an organizational commitment to excellence, purposeful ambition, and, most importantly, a pervasive sense of willingness. These are the traits that feed a company’s state of mind and state of readiness. I’ll expand on this idea in future blogs. We think culture is absolutely the key ingredient for brands that use the challenger ethos to do remarkable things.

MIKE SULLIVAN is president at LOOMIS, the country’s leading challenger brand advertising agency and a top Dallas advertising agency for digital, social, mobile and user experience. For more about challenger branding, advertising and marketing, leadership, culture and other inspirations that will drive your success, visit our blog BARK! The Voice of the Underdog and catch up on all of our posts.

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