“Financial Growth” is a Challenger Brand’s Best Friend

By Vincent Young

You’ve assigned a secret code name to each product on the development roadmap, you’ve spent months, sometimes years, preparing the required inputs for senior management to move the in-progress products through each step of your company’s stage-gate process. By now, you are well-versed in articulating and showcasing the new features, usability upgrades and specification improvements that the new line represents. The official product names and the new packaging design have been properly vetted through concept testing.  Your PowerPoint slides are packed with stunning visuals of how your new line out-specs and outperforms your competition. And now, the time has come – the time to unveil your well-researched, new product portfolio to your sales force and ultimately to retailers for plan-o-gram consideration.

This is when things begin to deviate from the planned course. The retailer cherry-picks your product line, asks you to reposition your prices and to “sharpen your pencil” on margin, and ultimately shows greater support for the well-funded category leader’s less-featured assortment. Why? How could this happen? This all-too-common position for challenger brands results because marketers of challenger brands often times fail to realize that FINANCIAL GROWTH POTENTIAL is the great equalizer between the all-powerful retailer and lesser yoked vendors.

In order to effectively compete, challenger brands must learn to package innovative product offerings together with marketing programs designed to represent at least one of the following four forms of retailer financial growth:

  1. Increase overall category demand – Retailers are measured based on year-over-year growth, excluding new store openings. A challenger brand with a plan to increase consumer demand for a good will always have greater leverage than one who simply offers a more robust feature set than the market leader
  2. Increase the attach-rate of high-value complimentary items – Developing a product line and promotional strategy that has the ability to uniquely grow the market basket is sure to maximize the support that challenger brands receive from retailers
  3. Motivate a “trade-up” within the category – What is it about your brand or product line that is sure to entice consumers to give the retailer more of their money? If your answer is “very little,” then remember that retailer margin dollars also serve as trade-up motivation to the retailer when making category assortment decisions!
  4. Help a given retailer win the war against another retailer – Successful challenger brands understand the importance of winning with key retailers.  Anchoring a new product launch with a sub-set of exclusive products and/or industry-leading, retailer-specific promotions can generate an over-indexing share of category for the challenger brand

So the next time you prepare to take your new product portfolio to market, take some time to think through the retailer financial growth platform upon which you plan to build your challenger brand strategy.

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  1. Steve Marzio says:

    Too many times, tech companies (with little to no leverage) spend so much time bringing their higher spec widgets to market and fail to consider thinking like a retailer, who is the primary path to the consumer. It is almost as if one of the manufacturer “gates” that you mention that are a part of companies’ development process should be a “RETAILER GATE.” That is, marketing teams should have to prove that their product, in their assumed proforma prices and margins, will indeed penetrate retail shelves and offer the retailer something of value….like category or market basket growth. Too often, ivory tower marketers just make assumptions that their better spec widget will surely be adopted by every major retailer. Pure “switching” is not in a retailer’s best interest to maximize overall category revenues and margin dollars. However, for a manufacturer, they will gladly take “switching” revenue and margin dollars to the bank. This is why us marketers cannot believe it when leading retailers are slow to embrace devoting significant shelf or circular space to the unproven, albeit often higher value widgets.

  2. [...] retailer’s financial performance by driving the attach rates of high-value, complimentary items (see my previous article  “Financial Growth” is a Challenger Brand’s Best Friend). Whether through the marketing of product features/attributes, promotional programs, or service [...]

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