What Challenger Brands Are (And Are Not)

This month we’re talking about what it really means to be a challenger brand. Sure, you could argue that every brand except the category leader is a challenger. By definition, that’s technically true. But challenger brands are defined by much more than market position. It’s the way they think about their position and what they do about it that makes them true challenger brands. We’ll start our discussion with one of our favorite examples.

The Story of Two Buck Chuck

At the 2007 California State Fair wine competition, the Charles Shaw Chardonnay, affectionately known to Californians as “Two Buck Chuck” because of its $1.99 price tag, took the top prize, beating out 350 other Chardonnays from all over California. Second place went to a lovely $18 bottle of wine from Napa Valley, while the most expensive Chardonnays in the competition — bottles that topped out around $55 — didn’t even place.

It was a feather in the cap of one of America’s most cost-conscious winemakers, but not the first and certainly not a fluke. Even before the 2005 Chardonnay was named “Best of California” and “Best of Show” at the 2007 fair with a score of 98 and a double Gold Medal, the Charles Shaw Shiraz bested 2,300 other wines at the 2002 International Eastern Wine Competition. That win was nice. But winning in California? That shook the foundation.

The wine competition at the California State Fair is billed as “the oldest, most prestigious wine competition in North America.” Established in 1855, it’s the place where wineries have their carefully crafted pedigrees validated, or refuted.

Charles Shaw winemaker Fred Franzia democratized fine wines by focusing on stridently pragmatic operations. His bottling plant was 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. When asked how he competes, his answer was simple, elegant, and maddening to the much larger brands he competes against. “We choose to sell good quality wines at $2 a bottle because we think it’s a fair price,” Franzia said in an ABC News article. “We think the other people are charging too much!”

What Defines a Challenger Brand?

According to the most recent U.S. Census information from the Small Business Association, in 2010, there were 27.9 million small businesses in the U.S., and 18,500 firms with 500 employees or more. Take out the top dogs in each of those business sectors and that leaves a lot of underdogs nipping at their heels trying to compete. Look around and you’ll see challenger brands of every size and type in every single category.

From our experience over 30 years, there are three primary factors that distinguish true challenger brands from the leading brands in their categories. In his book, “Eating The Big Fish,” marketing strategist Adam Morgan identifies two of these factors as “state of market” and “state of mind.” To those, we add a third we call “state of readiness.”

Next week, we’ll dive into each of these and share a preview of what we consider to be the ultimate challenger brand advantage.

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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