We live in an amazing country, with so many natural assets, beautiful landscapes, a temperate climate – it really is God’s own. But there are some challenges too. We are a small, isolated country. As a result, we have smaller businesses with fewer resources. We have a pioneering spirit, our forefathers had to be resourceful, living off the land, make do with less; and like them, many of us can run our businesses on the smell of an oily rag, just to get by. On the plus side, because of the size of the market, there is less competition. So that attitude of doing just enough can work, especially in smaller businesses where the charm or personality of the owner-operator can be enough to keep customers happy.
But this attitude can and does hold us back. If we want to grow and scale our businesses, then we need to move from a sacrificing attitude to an over-delivering attitude. Doing just enough is leaving the door open for the market leaders and increasingly international competitors to take your market from you.
Those market leaders are big, well-resourced, battle-hardened from operating in much more competitive markets where they are learning, refining and enhancing their products, services and marketing approaches at a rapid pace – because they have to. For us to compete and win against them, it’s not enough to have a great product/service or marketing campaign – it has to be exceptional. That’s what challenger marketing is about, understanding this disadvantage and figuring out how you can organise and leverage your resources to unsettle and win against a much larger competitor.
Against large competitors, you need both an exceptional strategy and to nail the execution. This hasn't traditionally been the approach of most kiwi marketers. We have to elevate our aspirations and standards if we want our local businesses and country to thrive. On the face of it this is easy to understand, but there are three factors that historically have held us back.
Firstly, as discussed, we are a small country and so we have a very low level of competition domestically. This lack of competition results in slower innovation, lower standards, and fewer options available to customers. Standards, quality and execution often are good enough locally. But local brands often find they don’t stack up against their more sophisticated international competition.
This has led to larger, globally funded multinationals setting up and dominating many of our industries. You just need to look at the banking, telcos, power companies, petrol stations and grocery industries to see that each one is dominated by two to four companies in cosy oligopolies. These are often multinational owned and controlled companies. Why are the majority of our big companies multinationals and why is this OK?
Secondly, we are not only small, but a long way away from everyone else. This isolation from our major markets has protected us from that intense competition and has provided us with a more stable, less competitive domestic market. Today that is changing. While we’re not getting any bigger or closer to the rest of the world, the acceleration of online shopping and eCommerce means that our competition is no longer the shop down the road but any online shop that will deliver to New Zealand. And as we know, through the lockdowns of 2020 and 2021, the level of online shopping dramatically increased and is only forecast to keep growing. In fact, as a nation our use of online shopping still lags significantly behind the rest of the world. Online in Australia now makes up 16% of all spending, compared to New Zealand’s 11%. In the UK and US, online penetration is well over 20% 1. So while our isolation may have protected us in the past, now an increasingly online world will drive us to lift our game if we want to stay competitive.
From an evolutionary point of view, our celebrated national bird is flightless for exactly this reason. In a country isolated from anyone else, with a lack of predators there was no need to evolve and develop the ability to fly. While okay here, our beloved kiwi wouldn’t survive if more predators were introduced here – and neither would many local Kiwi brands.
The last issue is education and capital. Our brands are smaller, so the business case to invest in and build big brands is tougher. Combined with the reality that our potential market is smaller, any potential investors aren’t willing to risk as much capital. We also don’t have the same belief and understanding of the power of building strong, engaging, challenger brands – because we’ve lacked the competition to demand it. So it’s not just the size of our business and budgets, but also our understanding of the value that building brands can create – and together this has led to a real lack of real expertise in building strong brands.
Looking forward, another reason challenger marketing is very relevant is we are in a period of high change and innovation. And that pace of change is only increasing, whether it’s AI, robotics, climate change, pandemics – we are living in a world where new needs and technology are creating new opportunities and as a result whole new categories are opening up. This is creating new brands that could naturally take a challenger approach to underline their relevance against the historical market leaders.
So historically we’ve had lower competition that has made us a little lazy, we haven’t really understood how a strong brand can drive business growth and our isolation has meant we haven’t had much international competition to change our ways, but that is increasing quickly now. And finally, we see a rapidly accelerating rate of innovation, which is creating an increase in new entrants and the development of new categories. To me, all of this means understanding challenger marketing is more important than ever – how can we help the little brands not only survive but thrive in this challenging world.
With children, the oldest has it the hardest and the youngest has an easy run (I know – I’m the oldest!). The opposite is true in the market. The number one’s in the market have the easiest run. Because of their size, things work better, their media spend is more efficient, their investments relative to their turnover are smaller, meaning more of their budgets can be put into working versus non-working marketing spend. And their brand awareness has been developed over decades. Everything just works better.
Because of all of this, they can spend proportionately less marketing spend and still generate effective results. They don’t have to spend to their eSOV (Excess Share of Voice) to maintain share – they can spend less and still protect their share 2. And because of this, they are more profitable.
This is why we all want to be that market leader, life is easier, spending is more efficient, there’s more money to go around and therefore more investment in new products, innovation, etc. – which (if spent wisely) helps them maintain their position and grow. This is what makes it even tougher for challenger brands to grow.
For us as challengers, it is the opposite. We need to spend for higher eSOV to grow, and even then everything has to be right. Spend alone doesn’t guarantee success. We need a great product, strong brand, a loyal community, bold/interesting/creative advertising, etc. A problem with any one of these means nothing will work. So working through a robust challenger development process in a complete and exhaustive way is critical. Challengers have to get everything 110% right.
This is the critical difference we really need to understand when we are in the middle of the chasing pack. When you are reading the marketing textbooks or learning about marketing at university, everything is simplified and the assumption you make is that marketing is the same whether you are a startup, a challenger or the market leader. This is simply not the case. While the principles are the same, the stakes are much higher when you are a challenger. There is no margin for error.
Before you get too depressed, while the stakes are higher for challengers, there are advantages too. You are on a mission to change the world. You have to be bold, innovative and creative to succeed. This is highly motivational for you, for your team and for your customers. This gives you focus, which helps you leverage everything.
So where do you start? The first thing you need to think about is deciding what you are pushing against, what is your core challenge.
There are four main directions you can take as a challenger:
Any one of these can be effective. It’s not hard to find local examples of these challengers in the market. Xero, AF, Flick and EcoStore are all examples of local challenger brands that slot into each of these four categories.
Looking specifically at one of these, Flick, is a brand we know something about. It’s easy to see the benefits of a challenger marketing focus. In a sector that is essentially a commodity, a challenger approach gives them something to stand for, something to fight against. It drives everything they do, their branding is bold and direct, their tone of voice is straight from a freedom fighter manifesto and their positioning ‘Take Back Power’, takes the fight to their competitors and drives their key points of difference in the market. On top of all of this they have created a bold clear single minded campaign that can’t help but get noticed.
To make a decision on which challenger focus is right for you is really an outcome of your strategic positioning work. Where is the best opportunity for you, considering the customers you want to serve, the competitors in the market, your strengths and weaknesses, your values and brand personality. Effectively positioning yourself in the market is about defining where you should be playing to win. How you then pick the right challenge is one of the key challenger levers that we will be exploring in later articles.
For us as an agency, challenger marketing is at the heart of everything we do. We are constantly seeking out ways to help the brands we partner with grow. Over the year we are creating this Challenger Marketing series and sharing it with any marketers that are interested. Our objective in doing so is to challenge and elevate the understanding of what it takes to build successful world-class brands from New Zealand. Whether you are working with us or applying these principles yourself, the result we are after is a stronger, more innovative marketing community making us proud of the brands we can create from the bottom of the world.
Written by
Duncan Shand, MD - YoungShand
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