Building Challenger Brands from the Inside Out

November 5, 2019 | blog | By Mike Sullivan
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In this last installment of a four-part #BarkBlog series about how challenger brands create big success by focusing on small consumer niches, we’ll look at the way leaders use company culture to drive their brands.

In 1992, a young Stefan Pierer paid $4 million to buy KTM Motorcycles from its creditors with an eye on a quick turnaround. It was regarded by many as a sucker’s bet. Once an Austrian icon, the brand’s luster had faded in lock step with the loss of industry respect. Worse yet, the brand had become a target of derision for customers who’d been burned by bad bikes while the company slowly collapsed under the weight of poor stewardship.

It’s one thing to start from scratch with a clean slate as an unknown brand and quite another to carry the burden of a bad reputation.

KTM had become the butt of jokes, and when the jokes were no longer funny the brand was all but forgotten. Such are the hazards of a fickle market that cycles quickly on the steady churn of fresh young buyers with short attention spans and a taste for the next new model.

If the brand’s health worked against Pierer, the state of the motorcycle market offered no help whatsoever. The market for motorcycles was shrinking, and fury had turned to frenzy among a group of aggressive rivals who offered high quality products and value KTM couldn’t match. With its claim to fully half the motorcycle market, Honda, with a gaggle of Japanese challengers in tow, held firm ground right where KTM needed to rebuild.

None of the news was good. As he considered options for his brand, Pierer surveyed a market in decline filled with cutthroat competitors cast against a cynical industry and a wake of jaded consumers. Add to this mash-up of misery a dealer network that had been all but dismantled by the brand’s demise.

Nobody wanted KTM motorcycles, which was painfully apparent to the few remaining dealers trying to sell them.

With no customers and slim prospects, Pierre made a pivotal decision for the future of his brand. It was a choice wholly informed by the challenger ethos, and it would ultimately serve to catapult the brand into an enviable and unassailable premium position, win the hearts of enthusiasts worldwide, and send KTM past Harley-Davidson as the leading motorcycle maker outside of Asia. Pierre’s decision? He went racing.

In 1993, just a year after buying KTM, Pierre assigned a full quarter of his annual budget to the task of winning the famous Paris to Dakar Rally, an unforgiving three-week race across the Sahara Desert. KTM’s first try at the Dakar was met with equal parts astonishment and amusement by industry observers and certainly no immediate success, but it sent a message about the destiny Pierre had envisioned for the brand

Moves like this often make little sense from the outside looking in, but the decision to go racing signaled something important from the inside out about the behavior Pierre wanted at KTM. It told those in its employ, and those who would one day be, exactly what was expected for the brand and of the people who controlled its destiny.

The company’s relentless focus on racing laid the bedrock for a budding culture that would be driven by performance and serve to define the character of the brand.

Of course, focus offered no immediate fix for KTM. Early racing efforts met with failure and there was no overnight success. The company struggled for the better part of a decade with all the challenges of a brand in distress, but KTM’s culture was growing stronger and more committed to its cause.

Eight years and eight successive tries later, KTM claimed victory at Dakar, besting stalwart brands and winning legions of new fans. In 2001, the company’s relentless focus on its singular purpose paid off and, with the determination of a relentless champion, it has paid off again and again every year since, earning KTM 18 consecutive Dakar victories and building a reputation as a brand that wins.

The importance of Pierer’s decision for shaping the KTM’s trajectory and its ultimate success is impossible to overstate.

The company’s single-minded focus helped create the sort of brand congruence challengers can use to claim and fortify formidable advantage. KTM built its brand position from the inside out by focusing first on creating a culture that the industry’s most influential customers would love.

Racing sets the pace in the motorcycle industry. From professional athletes to hometown racetrack heroes, competition shapes the industry narrative about its brands, and race fans know score. Racers are the influencers and KTM created an appeal especially for them with the kind of clarity of purpose they hadn’t seen from a manufacturer before.

Winning the hearts and minds of motorcycle racers informs the ethos at KTM. Every decision its leaders make is advised by the company’s mantra-like brand tagline, Ready to Race™, which serves double duty as its own internal cultural call to action. KTM’s cultural commitment to racing has driven everything from the types of motorcycles the company builds to the people they employ right down to the retail dealer network they’ve developed.

Unlike competitors who sold machines through multi-line dealers, KTM originally required single-line commitment from its dealers who themselves were racers. It’s a strategy that continues to pay dividends, as the manufacturer is on pace to double output in by the end of 2020, while the balance of the two-wheeler market declines by 15 percent.

The KTM brand is informed in all respects by its culture. Brand and culture have become a virtuous loop of self-reinforcing behavior that matches with precision the marketing messages KTM sends to consumers.

The synergy between KTM’s culture, brand, advertising, and experience at retail gives off the attractive clarity of lighthouse identity.

KTM promised that it would be for racers, and it delivered. When companies create high levels of congruence between brand and culture, they can set and meet the highest of customer expectations and, in so doing, build the essential trust of customers. Brands like KTM that do this very well occupy a singular position in their category for which there is no suitable substitute. Brands like Red Bull, Monster, and KTM achieve their ends first by clarifying who they are and who they’re for, and then by building their brands from the inside out beginning with company culture.

MIKE SULLIVAN is President of 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.

For more about LOOMIS, or to discuss how we can help your company succeed, CLICK HERE

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Mike Sullivan

President at LOOMIS, the country’s leading challenger brand advertising agency

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