In boom times, challengers don't stand a chance

Most challengers, stay challengers - your potential for growth is capped by the dominance of market leading brands. But in a downturn market leaders become vulnerable, creating a now or never moment where challengers can become champions.

An enduring myth about western economies is that they are dynamic markets. The reality is that over the past 40 years markets have become less competitive with start-up creation in decline and market concentration at an all time high.

Market leaders remain dominant by outspending competitors on advertising - ensuring they come first to mind when customers are ready to buy. Since most buying happens on autopilot where the brand with the most mental availability wins, less well-known challenger brands are rarely considered.

In downturns, buyers put more brainpower into buying

As buyers become more price sensitive, they begin to think harder about what they’re going to buy while putting more effort into buying.

Instead of purchasing on autopilot (e.g. choosing the most well-known brand) they hunt for items on sales, opt for larger sizes and shop at discount stores.

This behavior is not limited to industries featuring lower-priced, higher-volume products like consumer packaged goods.

A McKinsey study of buying behaviour in a recession found that 60% of buyers in the consumer electronics industry were “more interested in a core set of product features at a reasonable price than in all the bells and whistles at a higher price.”

While in the building-products industry their research revealed a shift away from premium-priced design features, towards simpler, basic designs. B2C or B2B, high or low prices - downturns inject greater ‘rationality’ into the buying process, leaving market leaders vulnerable.

It’s not a slowdown, it’s a shakeup

McKinsey also found that of the 18% of consumers who switched from market leading brands to value oriented alternatives, 46% said they found the value brand performed better than expected and 34% said they no longer preferred the market leading brand - even if their ability to spend rebounded.

This means nearly 8% of the market is now in play - a rare and significant injection of new buyers that are up for grabs. These large scale customer migrations (from market leaders to value oriented challengers) permanently reconfigure the market landscape.

Downturns are moments of great opportunity for challenger brands. Many household names like FedEx, CNN and Microsoft got their start in bear markets.

Here are three ways to take advantage of this opportunity.

1. Challenge the established narrative

Look for thoughtful and intelligent occasions to reframe the moment as not just a time for caution, but opportunity.

As the great Ayrton Senna pointed out, "you can’t overtake 15 cars in sunny weather… but you can when it’s raining."

2. Identify weaknesses

Market leaders can often coast during boom times, but during tough times their weaknesses are revealed. Identify market leaders who are vulnerable to churn, pinpoint the weaknesses and target their customers with campaigns that speak to those themes.

3. Reposition for value

A strong brand positioning rooted in the unique value your brand can deliver can help you build relevance with the new buyers in play. Smart marketers like you know that there is more to value than price.

Position your brand for success with six sources of value, as explained in our free white paper.

How challengers can position for growth

Using case studies and our experience working with international brands, this presentation clearly explains how challengers can use positioning to unlock the power of brand marketing.