Challenger Brands: Part I

Why challenger brands are important for retailers

In our Challenger Brand series, our Vice President Klaus Trapl takes a look at the wonderful world of brands so unique they can disrupt a whole industry. In 2009, the iPod was the most attractive gadget for accessing digital music, and the Blackberry the closest thing we had to today’s smartphone. The iPhone had launched only 2 years prior and the most recent model at the time, the 3GS, in June 2019. The headphones we used were small, cable-bound and playing noise rather than sound.

When Noel Lee, Head of Monster Inc., and music producer Jimmy Iovine sat down with the Trapl brothers in September 2009 at IFA in Berlin to discuss the launch and distribution of their new brainchild “Beats Solo”, the stakes were high and the ambitions even higher. Beats attacked the headphone market with a completely new concept and approach.

Not only did they defy conventions when it came to design, size and performance of the product, but they also introduced entirely new price points, thereby starting a revolution that is under way today, still. Aqipa and Monster agreed to join forces and within a year managed to bring the huge success Beats had in the US over to Europe, where the brand became a market leader in Germany and – in true challenger brand fashion – changed the way we see the category forever.

In 2009, coincidentally, Adam Morgan published the second edition of his bestseller “Eating the Big Fish: How Challenger Brands Can Compete Against Brand Leaders“. Challenger brands compete with much bigger brands in their markets by redefining in their favour the criteria consumers base their choices on. Market leaders are not invulnerable; they just seem that way before a smart, focused challenger brand takes them on.

In this 3-part series, we are going to explore the following questions with our readers:

Let’s jump right into part one:

What is wrong with market leaders, and how can challenger brands help?

Convenience determines many of our decisions as our brain tries to save as much energy as possible by taking shortcuts and reliably easy solutions. Most people buy brands out of habit and availability, not commitment or loyalty. According to Bryan Sharp, author of the book “How Brands Grow“, there is little evidence to suggest that consumers want ‘relationships’ with a brand.

“When you look at the data, what works in branding is surprisingly simple – making the brand easy to buy – by maximising its physical availabilty and creating an attractive and memorable set of distinctive brand assets; sensory and semantic cues such as colours, packaging, logo, design, taglines and celebrity endorsements that make the brand easy to like, memorise and recall.“

Brands have their own databases for the analysis of behavioural and sales data to maximise marketing and profits. They A/B test (comparative user-experience research) new offers online and use their websites as labs for product and research development. “For a long time, A-brands deluded themselves thinking they were successful due to branding and marketing. The truth of the matter is their supply chain strength carried them through by making sure they were on the shelf of every store, everywhere. Now global brands need to find relevance again. They’ll need to reconnect with consumers once more, this time online,” says Maz Amirahmadi, chief executive of ABN Impact.

Retailers need to be alert of the risks of exclusively relying on A-brands. Yes, they provide a high footfall and predictable revenues, but the pressure on margins is ever rising, and the negotiation power of A-brands is constantly increasing due to the possibilities and insights of the direct-to-consumer avenue, whether through their own online distribution or large, branded flagship stores that compete with multi-brand retailer distribution.

In our next chapter, you will learn why challenger brands are now more relevant than ever in helping retailers balance these risks.