Brand Strategy: How Challenger Brands Can Win

Double Jeopardy is a marketing law established by the Ehrenberg Bass Institute that states that small brands have fewer buyers, and those buyers are less loyal. Using a Mental Availability Assessment will help with your brand strategy and will show how challenger brands can win.

But that is not the only challenge facing a smaller brand with ambitions to grow and eventually be amongst the market leaders.  

They have less resources, both in terms of money and people.  Their lack of scale impacts their efficiency and therefore cost of sales are higher, which in turn impacts their ability to build wider distribution, which all becomes a limiting circular pattern.  In this article we offer hope and direction to all those looking to build a brand strategy that recruits more buyers from the big brands. 

At this point I want to stress that this is not a ‘big business is bad’ blog.  As a former CMO and CCO of one of the world’s largest beer brand owners, I am very proud to have been part of an organisation that creates so many jobs and contributes so much to the local economies and communities it lives in.  The intent here is to share my experience and give you an insight into the approach you will need to take to build an effective brand strategy and commercial plan. 
In other words, how to grow your brand’s Mental and Physical Availability.  

If you are not familiar with these concepts then take a look at our ‘Mental Availability Assessment’ blog.  But for now, the headline is that for brands to grow they have to be easy to think of and easy to buy and this approach is adopted by some of the biggest brand builders like Diageo, Mars and McDonalds.

By the end of this article you will have a sense of what it will take to win, a cost effective process to identify the growth opportunities and you will be able to build more compelling reasons why customers should give you valuable space currently allocated to the bigger brands.

In this first section we will consider the strengths and weaknesses of the competition.  

Brand Strategy: They are big for a good reason:

This is not an exhaustive list of the strengths and weaknesses of a large organisation, but I think I have called out the appropriate ones for the context of brand building.   

Strengths

• Cash
• People
• Distribution 
• Efficiency through scale
• Portfolio agreements with Retailers
• Data rich

Weaknesses

• Often less agile
• Multiple portfolio objectives
• Potential for the front end to be detached from the strategy
• R&R of a brand manager much wider than just marketing

As a Chief Commercial Officer I prided myself in our ability to mobilise a 300+ strong salesforce and rapidly build distribution whilst providing the appropriate ‘aircover’ of marketing activity to ensure we hit the rate of sale thresholds demanded by our customers. 

This was a strength of Molson Coors in multiple countries, for example the UK business grew Madri Premium Lager to over 1m HL within 2 years, because they had the resources, capability and commercial team alignment to execute the plan.  But it also worked because of the category argument developed for the Retail and Pub Operator Buyers.  This was an opportunity to take advantage of the premiumisation trend by aligning objectives with a major drinks company and grow volumes together in a higher margin segment.

More often than not, to achieve that level of success other portfolio choices are made and there is an opportunity for a challenger brand to spot which brand or brands might have had a reduction in resources and consider whether there is a compelling customer rationale for taking that space.  Often Retailers and Bar Operators will be keen to retain the equilibrium and not allow one supplier to get too big, so they will be looking for options to keep a balance.  

Getting the right data for your brand strategy doesn’t need to break the bank

It gets to a point in a large organisation where you can end up with too much data, which is the polar opposite of a challenger brand where you are likely to have limited data due to the prohibitive costs.   My guidance would be to secure data your competitor is unlikely to have or is unlikely to share with a customer.  For example, understanding your brand’s Mental Availability relative to the competitive set in your category will give you a sense of the type of rationale you will be able to build for your sales team to take to customers.   

In the chart below you can see that the laundry brand ECOVER has a much lower ‘4 week sales penetration’ percentage than its Mental Market Share* (MMS) score.  Whereas the 3 leading brands owned by Unilever and Procter & Gamble have very similar MMS and sales penetration scores.  If I was looking after ECOVER, I would be encouraged by the fact that the brand is being thought of in multiple buying situations and would hypothesise that the brand is being held back by less than ‘fair share’ distribution. 

I would then start to form a Physical Availability rationale for my customers highlighting the potential sales uplift if the brand was more widely available and the premiumisation and environmental credentials benefits that would bring.

*Mental Market Share is the share of all the links that are made between the category entry points and the brands, (i.e. the Mental Market Share).  You can think of this a little bit like your ‘sales market share’, where you’re keen to understand the brand’s share of all the sales in the market. With Mental Market Share, you need to understand the likelihood of the brand being retrieved in a buying situation compared to the competitive set in the category.  

Category Entry Points can be thought of as the mental pathways linking buying situations to brands. As Professor Romaniuk says, Category Entry Points would exist even if your brand didn’t.  Understanding what they are for your category is a potential source of competitive advantage.

3 Steps Toward Strengthening Your Brand’s Mental Availability and making the strategy stronger

1. Optimise Prompted Awareness
2. Build Mental Penetration
3. Widen Network Size

Brands grow by recruiting more light and non-buyers.  Yes, repurchase is important, but if you are not reaching new buyers you are unlikely to grow in the long term.  I acknowledge that challenger brands do not have the same budgets as the big brands, but investing what is affordable on ‘reaching’ the widest audience of category buyers is a prerequisite for growth.  

Prompted Awareness.  

This is the foundational work that has to be done.  It sounds obvious, but buyers of the category have to be able to associate your brand with the correct category.  

The chart above shows how many brands in 6 different FMCG categories have a prompted awareness of under 50% (amber) and how many have less than 25% (yellow), meaning that ¾ of category buyers were unable to link the ‘yellow’ brands to the correct category despite being shown logos of the brand.

Mental Penetration.

This measures how many category buyers are able to make at least one link between your brand and a Category Entry Point (CEPs) in a buying situation.  You will find more information about CEPs on our website, but you can think of these as the memory retrieval cues that buyers use to make purchasing brands easier.  

Brand Leaders often have a Mental Penetration of 80% with mid-size brands averaging in the region of 50%.   What is fascinating is that from a review of 166 FMCG brands we identified 50 where less than half of all of their non-buyers could link their brand to a single category entry point.  

Our research continues to identify small and mid-size brands who are trying to build deep relationships with a small number of buyers at the expense of achieving a critical mass who can link the brand to at least one Category Entry Point, i.e. Mental Penetration

To establish a healthy Mental Penetration score you need to take the principles of building Prompted Awareness, i.e. Reach over Frequency and combine it with clear messaging around a CEP that has the potential to become a Mental Advantage for the brand.  In other words it is a space where it might be possible to build superiority.

The table above illustrates the number of FMCG categories that still have ‘unclaimed advantage’ spaces for challenger brands to occupy.

Network Size

To increase the chance of being recalled in more buying situations a brand needs to be linked to more Category Entry Points.  The bigger brands tend to have a Network Size of between 5 and 8, with the highest score in our database being 10.  Often it is the case that smaller brands have smaller Network Sizes because their messaging is too narrow.  

Returning to the Laundry category, the table below shows that non-buyers of the ECOVER brand are able to make a very similar number of links to CEPs as the non buyers of the 4 big brands, demonstrating the potential of ECOVER to add value to customers if they make the brand available in their stores.  

You can look further to the right of the chart and spot smaller brands that can also construct the same customer rationale.  Brands like Smol and Method are doing a good job communicating their ‘green’ credentials in a way that is reaching non-buyers.  What we know from the Mental Advantage analysis for this category is that these brands need to widen their messaging to make more links to ‘effective cleaning’ category entry points.

You may be at the stage in your brand’s development where your growth is coming as a result of your first phase of distribution and advertising on social channels.  Just have in mind that at some point you will need to extend your Reach and your distribution.  In my experience, if you implement these ‘Challenger Brand Actions’ you will grow your Mental and Physical Availability, and will be well positioned to close the gap on the big brands.

As I said in the introduction to this article, some of the world’s most successful organisations implement these strategies.  

I will leave you with the checklist I used as a CMO which ensured I kept to these brand building principles.  They also formed the basis of our brand ‘playbook’.  

Recommended Video:

Try and find 10 mins to watch this video Benefits of a Mental Availability Assessment

Credits:

The Ehrenberg Bass Institute.

Professor Byron Sharp, ‘How Brands Grow 2’

Professor Jenni Romaniuk ‘Better Brand Health’

SmilingCFO Mental Availability database.

Author Bio:  Martin is a former Chief Marketing Officer and Chief Commercial Officer at a global Bevco, with 30 years experience in FMCG.  He is an expert in building Mental and Physical Availability, Portfolio Strategy development and aligning organisations behind brand execution.

You can connect with Martin on LinkedIn

You may find Martin’s blog post an interesting read regarding the 6 x tips for a brand planning process.

Here Martin has done a video on how a Mental Availability Assessment is good for building a marketing framework.