Defining a challenger brand: how to succeed as the market’s underdog

Who doesn’t love an underdog! Challenger brands, by definition, start at a disadvantage compared to bigger brands in their market—but through clever marketing and branding turn that disadvantage into their greatest selling point. They’re not easy and require great finesse, but if you can pull them off, challenger brand strategies are essentially a shortcut to a market leader position.
The question is, how do you pull off challenger brand strategies? Think of the guide below as a how-to primer; we’ll discuss what a challenger brand is and is not, explain the basics of the ten most successful approaches, and provide a few real-life challenger brand examples to see how it’s done.
A challenger brand is any brand that lacks the resources or recognition of a market leader, but nonetheless strives to conquer the market, usually by offering a new way of thinking that “challenges” the conventions of a particular industry. They are often considered the opposite of an established brand, likened to the classic takedown tale of David vs. Goliath.
Typically, a challenger brand displays two telltale characteristics:
Although those are the basic criteria, challenger brands are also commonly characterized by their emphasis on marketing. To take down a big brand as a small brand, you need public opinion on your side, and that means an exceptional marketing strategy for publicity, outreach and awareness, and a powerful brand identity.
Of course, challenger brands don’t stay challenger brands forever. If they’re successful, they become the market leader themselves, setting up the industry for a new challenger brand down the line. Just look at Uber: they started as a challenger brand in the taxi industry, swiftly became a market leader, and then opened up the market for new challenger brands like Lyft.
When people hear “challenger brand,” they often think of an idealized stereotype: a counter-cultural or “edgy” startup dead-set on turning a market upside-down. And while those types of challenger brands do exist, they don’t at all represent the scope of possibilities that a challenger brand can be.
For starters, challenger brands don’t need to be new or unknown. Older and established brands can still be challenger brands if they’re considered underdogs in their market. Moreover, any company can rebrand themselves as a challenger brand at any time, as long as they offer a new way of doing business for that market.
Moreover, challenger brands don’t always need that edgy or aggressive persona. Challenger brands can still be mild-mannered and polite—just look at all the humanitarian challenger brands out there. They still seek to challenge the normal way of doing something, just with honey instead of vinegar.
Challenger brands are often associated with disruptor brands—and for good reason. Both challenger brands and disruptor brands aim to change the way an industry works, typically with new technology, business models, or uprooting conventions. The truth is, challenger brands are often disruptor brands, and vice-versa. So what’s the difference?
Disruptor brands are more closely associated with brass tax business policies; they offer a cheaper or more efficient product/service compared to what’s currently available, ultimately upsetting the preexisting market balance.
Challenger brands, however, deal more with the branding and perception aspects of businesses; consumers view them as new or different, even if their business model is similar to the market leaders.
As such, challenger brands place more emphasis on marketing and branding, while disruptor brands place more emphasis on manufacturing and business structure. Really, the distinction is slight, which begs the question, “why not both?”
As we’ve been saying, positioning yourself as a challenger brand is all about perception. A challenger brand is defined by its brand identity.
In their groundbreaking book Overthrow II, Adam Morgan and Malcolm Devoy describe the ten most effective personas for challenger brands to adopt. Below is a quick synopsis of each, along with challenger brand examples for each.
Dramatic Disruptors follow the standard disruptor model we outlined above: providing a better product or service than what’s currently offered. These challenger brands rely heavily on technology, manufacturing, logistics, and other “strictly business” fields, but still require strong marketing and PR to make sure their public image does justice to their behind-the-scenes operations.
Example: Casper, the mattress company, reinvented the buying experience for shoppers by restructuring the shipping logistics for such a large item like mattresses. This enabled more shoppers to buy mattresses in-store and online, cutting into the mattress leaders’ markets.
The Enlightened Zagger takes advantage of social unease and discontent, offering an attitude or behavior that’s culturally different from its peers. For example, as people have become frustrated with mainstream journalism in recent years, “slow journalism” grew more popular as an alternative.
Example: Delayed Gratification is a key publication of the slow journalism movement, investigating events up to three months after they first occurred.
Feisty Underdogs play up their status as the underprivileged, disadvantaged brand in any given market, which in and of itself highlights their differences from the big brand market leaders. These play well for consumers who want to go against the grain.
Example: Under Armour sportswear went toe-to-toe with sportswear giants like Nike back when it was relatively unknown. It used media product placements and celebrity athlete endorsements to turn the tides.
Next Generation brands give respect to the market leader, but with an understanding that their time has now passed. These brands focus on what’s happening at this point in time—both in technology and social relevance.
Next Generation challenger brands point out all the areas where market leaders are outdated, simultaneously correcting those areas in their own business model.
Example: Impossible Foods offers plant-based substitutes to meat, at a time when consumers are looking for new solutions to the concerns of the meat industry.
While big brands unintentionally come off as distant, cold, or impersonal, the Real & Human challenger brands offer consumers more warmth and personal connection. Their branding often utilizes humor, a conversational tone of voice, and maybe even a cute mascot to soften their image or tug on heartstrings.
Example: With a cartoon mascot and a great sense of humor, Mailchimp conquered the email marketing industry by being a breath of fresh air next to its stuffy, strictly business competitors.
Irreverent Mavericks play the loveable troublemakers of their industry, purposefully provoking their adversaries and making fun of the current system with a devil-may-care attitude. These brands usually portray themselves as rough around the edges and make a show out of not playing by the rules—you can spot them on social media firing shots at the market leaders.
Example: Pushing guerilla marketing in its infancy, the Dollar Shave Club stole the younger shaving market with its absurdist, self-referential online videos.
Democratiser brands offer to the masses what was once only accessible to the elite, typically through offering more affordable versions of the product, or a more cost-effective business structure that allows for lower markups. Democratisers do well in industries plagued by exclusivity, in particular, fashion.
Example: At a time when a single company had a monopoly on eyewear, Warby Parker targeted the ecommerce market with more affordable—and fair—prices. Their Buy a Pair, Give a Pair charity and Home Try-on program also strengthened its “for the people” branding.
Missionary brands depict themselves as charitable, compassionate, and altruistic, with rhetoric that borders on “saving the world.” More than just an outlook, Missionary brands often incorporate their philosophy in their business model, such as donating a portion of proceeds to charity.
Example: Patagonia puts its activism work side-by-side with its clothing products, donating 1% of all sales to environmental groups and taking an active interest in land preservation. In terms of marketing, the company is not shy about mentioning its activism either.
Drawing on community connection and hometown ties, the Local Hero takes a “company next door” approach against the bigger, broader brands. Local heroes often champion a specific geographical culture or national identity, citing regional slang, sports teams, and other peculiarities that only “true locals” would understand.
Example: Founded by a former hockey star, Tim Hortons highlights Canadian themes in their advertising campaigns, particularly donuts and hockey. One campaign revolved around Canadians abroad feeling homesick for Tim Hortons.
The People’s Champion addresses the industry inequalities to give the same products or services to underrepresented consumers. They often depict the market leader as unjust or even greedy, while offering a more egalitarian business model.
Example: T-Mobile US made a name for itself in the competitive wireless industry by calling out Verizon and AT&T directly in their advertising, pointing out by name all the customer frustrations like data charges and contracts.
Inkkas is a clear example of the Missionary strategy. An American company that partners with Peruvian laborers, they depict themselves as both ecological and humanitarian, nevermind the hundred-dollar price tags on most of their products.
Like other Missionary brands, Inkkas puts their words into actions. Specifically, they plant a tree for each pair of shoes sold, as part of their OneShoeOneTree project. This gives them far more clout than their larger competitors, which Inkkas leverages to position themselves on the same level as the industry leaders.
While they don’t have the resources of the mammoth footwear corporations, they’ve already succeeded in getting their name in the running just by publicizing their environmental efforts. For many their appeal is still the Peruvian style and material of their shoes, but the added bonus of “wearing a piece of a better world” gives them an edge in the competitive footwear market.
The Swedish furniture giant IKEA wasn’t always a household name—it started out as a Dramatic Disrupter challenger brand. At a time when the furniture industry was dominated by expensive products from skilled experts (or cheaper products of lower quality), IKEA was able to offer high-quality products at inexpensive prices by having the consumers assemble the furniture themselves.
The simple model proved to be a brilliant business strategy. IKEA was able to cut the costs of labor, manufacturing, and shipping, passing the saving on to grateful customers—as long as they didn’t mind a little DIY construction.
BrewDog isn’t just a prime example of an Irreverent Maverick; it also exemplifies the journey of all challenger brands. They combine all the greatest strengths of a challenger brand: correcting the inherent flaws of an industry, targeting unaddressed customer pain points, offering new and improved products than what’s available, and above all aggressive marketing.
The Scottish company started out by offering beer with a stronger alcohol content than their competitors. When their beer started getting banned, they leaned into the “bad boy” image and their publicity doubled, with irreverent marketing campaigns and even stronger beer.
Today, their marketing campaigns always feature a “punk rock” attitude, leading to the ads themselves occasionally getting banned as well.
New York’s own Local Hero brand, Shake Shack started as a Madison Square Park food kiosk and blossomed into an international restaurant chain.
While part of Shake Shack’s appeal comes from its unique recipes, it’s real strength lies in its ability to duplicate the Local Hero branding in every new location. Typically each new Shake Shack location offers a unique menu, taking local cuisines and tastes and merging them with the style of their existing brand.
Add to that some quirky branding (like their “Poochini” ice cream sundaes for dogs) and stellar community outreach involving local charities, and you can see how Shake Shack becomes a local hero no matter where it pops up.
The fast-fashion brand Fashion Nova enjoys the same popularity and search traffic as industry leaders Chanel and Gucci, despite the hundreds of dollars difference in their pricing. What makes this more impressive is the overall decline in the industry’s compound growth—down to 7.6% from 15.3% in 2018—thanks to oversaturation in Western markets.
As a People’s Champion brand, Fashion Nova’s speciality is offering apparel that looks high-end at low-end prices, in particular to their minority fan bases.
Like many challenger brands, their secret lies in their marketing. Fashion Nova partnered with thousands of online influencers, including A-listers like Cardi B, to grow a dedicated customer base of young consumers. In response to reports of underpaid workers, Fashion Nova cemented their People’s Champion persona by donating $1 million to charities for the black community.
Unless you’re a multimillion dollar industry leader, becoming a challenger brand is a viable strategy for repositioning yourself in your market. It starts with an idea on how to revolutionize your industry—a new product, a new business model, a new way of thinking—but that idea needs to be nurtured and grown by intensive marketing.
Challenger brands depend on marketing and public outreach. Without proper publicity, no one will know what you’re trying to accomplish or change and the status quo will win. The downfall of many would-be challenger brands is that the consumers don’t even know an alternative to the norm exists.
It’s really important to create a good balance of strategy and agility as a challenger brand in order for you to succeed. One way you could do this is by running a brand workshop, which would bring focus to your brand positioning and help you to identify your values, mission and tone, etc. You then need to be working with a Creative Director who knows how to translate this into a scalable brand identity.
99designs Studio can offer you both of these things remotely and give you the edge in challenging the status quo. To be able to be the David of the scenario and topple Goliath, you must be thinking about entering the market or scaling with a brand that speaks to your strategy. Upon which, you can iterate and ultimately, scale.
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