4 Trends That Are Huge Obstacles For Challenger Brands

By Vincent Young

There are many recent trends that have increased the need to create a forum that highlights and shares the best practices of challenger brands at retail. Among them, the four that marketing executives seem to mention most often are:

1. Improper Training – Today’s Business schools offer many courses and seminars designed to expose undergraduates and MBA candidates to the traditional strategies and approaches associated with the “brand management” discipline. These “classically-trained” marketers are taught the analytical rigors of statistics and market research, the product development “stage gate” process, how to interpret a media plan, and how to build a standard financial pro forma. From internships with traditional, category-leading brands, they learn the nuances of test markets, loyalty programs, and new segment evaluation. Unfortunately, they are rarely exposed to the necessity of engaging key retailers early on in the product development process, how and when to create a derivative product for a retailer, how marketers must manage channel conflict or how to make the trade-off decision between funds to pay a slotting fee to a retailer versus advertising the brand.
2. Retail Industry Consolidation – Across nearly all classes of trade, the pace of retailer consolidation has increased recently. Some retailers have been permanently impacted by the recent economic downturn which has resulted in a lower level of consumer spending; some have been driven out by the lower –cost “scale-model” of the national big-box mass merchandisers. Regardless of the reason, the reality that most national challenger brands are facing is that a smaller set of retailers will represent a larger percentage of market access, thus giving even more power to the retailer to set the rules of engagement for the category. As a result, brand marketers are no longer asking the question, “How should I position my brand against my target audience?” Rather, they are now asking “How do I successfully position my brand within the landscape of Retailer X?”
3. Private Label – National challenger brands have largely become wedged in the middle at retail. Nearly every category features a well-funded category leader (typically occupying the premium price position) as well as a private label which occupies the “value” position.  According to Mintel, almost 1,800 new private label foods have hit store shelves in 2009 alone. This comprises 27 percent of all new food products that have been introduced this year. Striking the balance in the middle between investing in features that distinguish from private label without reaping the price premium of the market leader is a tricky proposition to sustain over time without creative marketing and sales programming.
4. Fewer Advertising Funds – The current economic climate has put more pressure on companies to achieve more and spend less. Nowhere is this more evident than in the demands we place on marketers to maximize ROI and minimize the breakeven period on advertising investments. As a result, advertising funds have come under tremendous scrutiny and marketers are now forced to rely a lot more on the assets owned and managed by retailers (websites, circular ads, loyalty programs, etc) to launch and sustain products in market.

Let’s face it, challenger brands today have to be more creative and resourceful than ever in order to survive in the world of retail. There are many examples of marketing strategies and programs that challenger brands can deploy in order to maximize their leverage in the retail space – and that’s what this blog is all about!  We are committed to sharing with you the case studies, interviews, articles, and other perspectives that are sure to help create a greater balance of power between you – the challenger brand – and the retail class of trade.