THE NUMBER OF BRANDS OPENLY ADOPTING A CHALLENGER STANCE

The first significant recent development in the world of Challenger brands is in the number of brands (and other entities—countries and cities, for example) explicitly adopting this Challenger brand stance: Large companies from North America to Singapore to South Africa openly declaring they want and need to think like Challengers, company-wide. And alongside them we find an even larger number of commentators discussing brands through this explicit lens: If you Google “Challenger brand” today, you find people writing about the Challenger brand approach in business from India to Australia to Mauritius, ranging from the fields of politics to education, via soap powder and social networking sites along the way. The concept and language of a Challenger brand has become a mainstream and explicit part of the marketing landscape (whether it is always fully understood or not).

THE DIVERSITY OF CHALLENGER STANCES

The second key development in Challenger brand thinking over the past 15 years lies in the diversity of Challenger stances we see taken by Challengers in their chosen marketplace. One of the purposes of the second edition of this book, in fact, is to help us intelligently look at options other than the default Challenger model (which one might characterize as essentially a cluster of attributes around the David versus Goliath theme). Understanding this broader diversity, and how we use it to our advantage, is going to be central to our success.

It is not hard to see why there has been this overarching focus, historically, on “David versus Goliath” as to what it really means to be the Challenger. It is undoubtedly partly the influence of the four iconic Challengers we noted earlier, and how well that stance has worked for them. And may well also be to do with the implicit influence of military metaphor that underlies so much of the language of marketing (targets, share battles, etc.). For what has been the most influential thinking on how a Challenger succeeds within military conflict? The doctrine of guerrilla warfare, whose philosophical authors and successful practitioners in the real world—Che Guevara, Mao, the Viet Cong, Lawrence of Arabia—have made this perhaps the most famous military strategy in the world.

But of course there is a much wider range of Challenger stances one can take than this. For a long time the real scope of the diversity of stances available to us seemed more genuinely visible in the spectrum of political, rather than business Challengers. At either end of the tonal range, for example, one might put the open confrontation of the rioting Paris students of 1968 on the one hand, and the gentle (but more effective) challenge by Gandhi to the British on the other. In between we have seen political Challengers combine the strident with the charming, the steel with the velvet glove: look at the self-styled “Raging Grannies” who doorstepped President George W. Bush over Iraq, for instance, or the smiling Katharine Hamnett, chatting cordially with Mrs. Thatcher in Downing Street while simultaneously wearing a T-shirt that screamed “58% don’t want Pershing” (the cruise missiles scheduled to be sited in the United Kingdom). What a brilliant combination of charm and stiletto each wielded—and how intriguing to wonder, we thought, how we as Challenger brands might achieve that kind of potent combination.

But in the recent brand world, too, we are finally coming to see a far richer range of Challenger attitudes, natures, and tones. JetBlue, Red Bull, flickr, Zara, Linux, innocent—each of these has taken a very different approach in order to succeed. They have had to—for, of course, the stance you take as a Challenger is of necessity heavily influenced by the cultural and category context in which you find yourself. (So, for instance, if there are 150 drinks in the energy drink category, and they are all being irreverent mavericks, then one thing a genuine Challenger to Red Bull is not going to try to be is yet another irreverent maverick. It will need to find a different way to challenge the conventions of the category or the culture around it.)

And with this fresh diversity from both the physical and digital brand worlds has therefore come the ability to better define the potential choices available to us of the different kinds of stances a Challenger can take in their chosen marketplace. For instance:

i) The Missionary—like Dove, as an agent of change in the beauty category

ii) The Visionary—exemplified by method’s vision of a relationship with cleaning that transcends functional germ kill

iii) The Enlightened Zagger—typified by Camper’s championship of “slow” in a fast world

iv) The Real and Human alternative—personified by Ben & Jerry’s

v) The People’s Champion—a torch famously carried by Wikipedia and Linux

vi) . . . As well as, yes, of course, the stance of the feisty little David

These six different stances, and six others are discussed in detail in Chapter 12. In that chapter we will also go on to explore how the nature of this diversity may shed some insight on how long-lived Challengers successfully and continually renew their relationship with the consumer. It will suggest, in fact, that perhaps the whole notion of how one maintains Challenger longevity lies in intelligently evolving across this Challenger typology.

THE CHALLENGE TO THE FUNDAMENTAL WAY WE THINK ABOUT LONG-ESTABLISHED CATEGORIES

The third key development in the centrality of Challenger thinking to marketing and business is the way in which some of the new Challengers are not simply gaining share or changing brand rankings, but threatening to fundamentally overturn entire categories and our frameworks for thinking about them. Twenty years ago, we saw Establishment brands threatened by new Challengers (IBM); now we see the fabric of entire industries and the behavioral cultures we attach to them threatened by this new generation.

Let’s briefly consider some obvious examples. While YouTube is evidently a Challenger to television in terms of offering its own live TV channels as well as being an alternative source of entertainment, it has also in the process in effect redefined our notion of quality entertainment. Quality in visual entertainment, one could argue, is no longer about wonderful production values or compelling narrative—post YouTube, it is now simply about how good or fresh the idea is and the emotional effect it has on us (and the person we pass it on to). Wikipedia challenges not only the way we receive authoritative information (Microsoft’s Encarta and Encyclopedia Britannica are casually brushed aside by a site that now accounts for one in every 200 online visits), but also our long-held notions regarding credible sources of it (the “amateur versus expert” debate). The foundations have been pulled out from under the conventional music business by iTunes. Game changes such as the Tata Nano and the $100 laptop look as though they will come to create a profound shift in the automotive and computer businesses. Will social networking sites bring down conventional e-mail? What will the Kindle e-book reader do (if anything) to the book business? Will we see a generation of consumers used to “free” Challengers (free music, free entertainment, free texts, free search, free software, free newspapers, free gaming, free calls) question the whole value and transaction model more broadly in every aspect of their lives? (And could this translate into packaged goods?) What will be the impact of environmental Challengers not just on the way we vacation, but on the whole way we think about packaging and what we really need and don’t need in that packaging?

And all this structural change before, of course, we have really begun to explore the intimately related future of communications.

A STRATEGIC MODEL, WITH SOME CONSISTENT PRINCIPLES

While this broad and multifaceted emergence of Challenger diversity has been taking place, our context for it—the context of the marketing, consumer, and brand landscape—has obviously also been changing enormously. In our marketing world, some things are new (social everything), some things are back (product performance), some things are wrongly written off (TV), and some things are trumpeted and then forgotten. And the socio-digital economy has currencies all its own that we are having to learn, even as they flex and evolve themselves.

While we might disagree on this implication or that implication of the changes around us, one thing is clear to everyone, it seems: Marketing, or rather the transition that marketing is making, is now to be seen as a journey without maps. We know, because influential CMOs have told us, that the old marketing model is broken, and certainly we have all lost confidence in it. What we don’t yet know—because it is in a state of continual emergence and experimentation—is what the nature of the new model is that we are supposed to replace it with.

So, at one level, a thorough understanding of successful Challengers is ever more interesting and important to us. Even if we yet lack a coherent model, we can at least take some consistent principles with us. And perhaps these principles should be Challenger principles, for in a very real sense this new world will make necessary Challengers of us all.

It is these principles—which we’ll come on to call the Challenger credos—that the book offers for us as a framework as we move forward. A constant way of thinking for us and our team to help us steer our brand into a dynamic and rapidly evolving future.

CHANGING CRITERIA

Discussing Challengers in this new world is not without its difficulties, though—it is obviously often hard to be entirely clear who is challenging what. Who and what is Facebook challenging, for example? MySpace? Google? E-mail? Basic human concepts of what it means to be friends? What are we to make of the new brands from India and China—that Tata Nano, for instance (a four-seater car costing $2,500)? It is not going to be sold in Peoria or Paris any time soon, but it will significantly affect the shape and nature of car purchasing and thinking in emerging markets. And China’s Infosys, Wipro, Lenovo—are they Challengers? Or still, in effect, products and services with logos (to the Western world at least)? What of the new brands to Africa, such as One Laptop per Child (OLPC)? Not yet a threat to Dell’s sales, but it certainly challenges our conceptions of what can be done with technology in poor economies—and it certainly stops and makes me think about exactly what I need from a highly overspecced computer that I am going to buy for my 13-year-old sons in London.

So I have modified in one significant way over the past 10 years my definition for Challengers to include in the study. When we researched the book originally, my partners and I wanted to see three to five years of success before writing about any of the brands we considered. Now, if we were to wait and give each brand the five-year test, we’d either be risking many of the more famous ones becoming clichés, or perversely ignoring some of the most profound potential shifts any of us as marketers have to consider. So let us, with our eyes wide open, embrace a slightly different approach in this edition. Let us look at well-established Challengers, for the main part, but accept that we will need to consider some of the more important new contenders before it is yet clear what their real mid-term trajectory is going to be. And we accept as we go along that there are some much larger challenges posed to the fundamentals of the world around us, and we explore these toward the end of the book.

AN OVERVIEW OF THE FLOW

After exploring some of the key challenges facing us as number two, three, or four brands and reviewing the argument about why we need to think differently from a Market Leader, the book then goes on to discuss the key commonalities Challengers seem to share in terms of Attitude, Strategy, and Behavior. (See the following page.)

Once we have looked at each of these principles in turn, we go on to look at what it means to be a Challenger brand driver (or Lighthouse Keeper) today, and close by discussing the “ghost in the machine” for all of this: how Challengers manage and indeed lean into risk.

For those of you familiar with the first edition, each of the credo chapters has been substantially updated and considerably revised, and there are two wholly new chapters (Chapter 5, “Monsters and Other Challenges,” and Chapter 14, “The Scope of the Lighthouse Keeper”).

Finally, the book is designed to be practical, and a series of exercises towards the end is intended to provide stimulus when applied to your business. In addition, you can see some of the interviewees talking on video by following relevant links to a web site for the book; these links are indicated at the end of each chapter. This is not simply to be digitally current; it is because in many ways it is the way Challengers talk, as well as what they say, that is the crucial factor in understanding the underlying Challenger mindset we will need in order to succeed.

The Challenger Strategic Approach

Foreword

The true test of an idea, a model, an organization or a brand, is whether it can withstand the test of time. There has never been so much testing in such a short period of time as in the last nine years.

Nine years ago, Google and YouTube did not exist; the iPod was one idea, of many, in Steve Jobs’s head, and the founder of Facebook was not even allowed to drive. Cable fragmentation and consumer zapping were the issues marketers dealt with, not streaming, downloading, or a la carte and on-demand viewing and listening. We had desktops and laptops then, but no BlackBerries or Treos to check at midnight or before brushing our teeth in the morning. The world seemed to have more curvature; now it feels it is virtually flat with competition for goods, services, and labor coming from anywhere and everywhere. Nine years ago, there was no 9/11 and institutional data mining for surveillance and consumer journalism were the subjects of only fiction books and movies.

Eating the Big Fish was also published nine years ago. At the time, Adam Morgan made waves describing the philosophy, profile, and behavior of a Challenger brand trying to dethrone “The Big Fish,” perceived to be infallible and invincible. He was clear in articulating the amplified challenges of a Challenger brand within the changing consumer dynamics of the time. He spoke of: a consumer who was not listening, believing, or consuming like she used to; the fluidity and permeability of categories that would no longer fit within the well-defined segmentation boxes of a marketer; and the ineffectiveness of communication that could not capture consumer’s imagination in a world where no one was actively listening.

Adam described the Challenger mind-set as “An ambition that exceeds conventional marketing resources and the preparedness to accept the marketing implications of the gap.” Challengers can break through by understanding their Big Fish and radically simplifying consumer choice, or by creating new criteria for evaluating a category, or by dramatically changing the sand box. It is all about making tough choices; not about focus, but about Sacrifices. It is about letting go and saying “no” to the existing multiplicity of marketing options; to concentrate energy on the ones that matter the most. Within this framework, Adam created the Lighthouse brand concept. Lighthouse brands have a clear and unapologetic point of view and invite consumers to navigate around them. They are not afraid to flaunt their values even at the expense of alienating some consumers. And they live to consistently delight and surprise consumers, using every possible angle at their disposal, especially the nontraditional. Brands like the Mini Cooper, Harley Davidson, The World Wrestling Federation, Mountain Dew, and Unilever’s Axe have lived by the Challenger principles for many successful years.

I read Eating the Big Fish in the year 2000 as I was beginning my journey as Chief Marketing Officer of PepsiCo Beverages International. Leading the marketing efforts for the quintessential Challenger brand company in its most intense category and its most competitive market gave me the playpen to bring Adam’s concepts to life. I have been a believer ever since.

But times change, thinking evolves, and in nine years, the winds of change have been transformed into the typhoon of change. Wired magazine called our times the Petabyte age, an age where infinite information can be stored, processed, and organized to drive innovation in every field and every industry and provide more customized choices than ever before. In this world of algorithm-based thinking there is sometimes the tendency to eliminate or discard the models of the past, even when the past is measured now in months or years instead of decades. As marketers then, one of the toughest questions we will face before embracing new options is: “Within this ocean of change, what are the key principles and process that we must maintain?” I will submit to you that in a world where information overflows our capability to absorb it and the foundations of science and marketing are challenged by it, where consumers are wired 24-7 and are blessed and cursed by choice, where institutions, leaders, and brands are exposed by the vigilant and omnipresent eye of consumers, Adam’s Challenger brand and Lighthouse Identity principles are more vital and vibrant than ever.

I was very happy when Adam told me that he was going to revise Eating the Big Fish and was truly honored when he asked me to write its foreword. I have enjoyed this assignment thoroughly. In this revised edition, Adam confirms the principles of his 1999 book but brings them to life through new and up-to-date examples of Challenger brands behaving as such within the new world order. Like a lighthouse itself, there is semper aliquid novi, or always something new, but the book is firmly grounded within the bedrock of the original Challenger brand essence.

My journey through this book was different from the first time, though. Life has taken me into new adventures and now I am blessed to manage a truly phenomenal Big Fish. So I have reread his book from a very different point of view. In spite of my eternal agnostic mind and my firm belief in constant evolution, I was still able to confirm its concepts. In fact, I now firmly believe that the new world order requires a Challenger brand mentality even when you lead. Categories are constantly being restructured and competitions have been amplified by the steroids of technology and the democratization of media. Megacategories like personal computers, software, music, beverages, and financial services are being resegmented every day, opening the doors to new leader-Challenger discussions. This forever changing environment, where consolidation and fragmentation coexist, implies that potentially every David could play Goliath and every Goliath could play David in any aspect of a broad-based business.

Importantly, as the pressure for returns on investment continues for companies and their marketing investment, affordability, and predictability of available media will force everybody to break with convention. Therefore, breaking and transforming needs to be not only the privilege of the Challenger but also, the obligation of the leader.

For overexposed, overinformed and overwhelmed consumers, a brand with Lighthouse Identity can truly be more relevant than ever. It can be an aid for navigating the storm of choice, a trusted haven to satisfy all her needs within a defined space. The new order requires that any brand with aspirations, Challenger or not, relies on a solid rational bedrock, is enhanced by a strong and authentic emotional connection, but is also inspired by a true sense of mission in the world. All of this guided by a thorough understanding of its history and DNA coupled with a genuine and authentic sense of purpose. Within this model, the Lighthouse Identity brand understands the need for total transparency and consistent dialogue with its consumer, without forgetting its self-referential and unapologetic essence.

Finally, Adam’s Challenger mind-set presents three timeless principles of universal appeal. First, “Intelligent Naivety” will encourage any business to consistently embrace doubt and ask the tough transformational questions required for constant innovation and rejuvenation. Faith is, after all, an active exercise in doubt. Second, to have a self-referential and unapologetic point of view, the brand will have the obligation to answer to itself its big questions first. This means big questions cannot be delegated to consumers because consumers “do not know what they do not know” and their opinions are always grounded on what is and not in what can and must be. Third and last, the Roman poet Lucretius’s call for Semper Aliquid Novi, or always something new, reminds us of the need to constantly delight and surprise but always within the essence of the lighthouse.

As I said, this is a timeless book and its principles transcend market share position. To transcend, we must challenge, especially when we lead!

Antonio Lucio,
Global Chief Marketing Officer, Visa, Inc.

PART 1

THE SIZE AND NATURE OF THE BIG FISH

THE LAW OF INCREASING RETURNS

At one level, we know all about the benefits for a Market Leader of critical mass—the advantages at consumer, company, and competitive levels the Brand Leader enjoys over every other player in the game due to their size advantage. And these are of course enviable advantages: Who would not want the distribution power of Anheuser-Busch over the trade, or the ubiquitous consumer visibility of Coca-Cola, or the research and development resources of Procter & Gamble?

But this is not the key point we are going to recognize here. Nor is the preference given to the social acceptability of the brand leader by the uncertain consumer (whatever Wilt Chamberlain thinks); nor indeed the formidable trust and reassurance it enjoys; nor yet the power of its monstrous marketing budget relative to ours. These are odds we know and understand. These all merely lead us as Challengers to talk generally about “trying harder” and “differentiating in our advertising,” and “focus.” Everything we are already trying at the moment.

What we are going to look at first is how, even knowing all this, we are still underestimating the difficulty of the situation facing us: The true dynamic is actually worse than this. For it is not just that Brand Leaders are bigger and enjoy proportionately greater benefits: The evidence we are going to consider suggests that the superiority of their advantage increases almost exponentially the larger they get.

FIGURE 1.1 Small brands need greater excess SOV to grow.

Source: Les Binet and Peter Field, “Marketing in the Era of Accountability,” part of the IPA Datamine series.

THE LAW OF INCREASING RETURNS

The simplest illustration is that of the relationship between share of voice and share of market. We all know, from theory and experience, that there is a strong correlation between the two: that your share of market will usually correspond strongly with your share of voice, and if you want to increase your share of market you will have to increase your share of voice. John Philip Jones’s work has shown clearly that smaller brands need to spend proportionately more than larger brands simply to maintain equilibrium. Recent analysis confirms this to be true of growth as well: If one analyzes brands that have sought to grow, smaller brands have to disproportionately increase their share of spend ahead of share of market in order to grow, while larger brands, conversely, have to make relatively smaller increases in share of voice to derive those same market share increases.

This is illustrated in Figure 1.1. This graph examines the data of almost 900 growing brands where the growth was proven econometrically to come from the way they used communications. The horizontal axis on this graph groups the brands by their share of the market: the left-hand column, for instance, represents brands with 5 percent share of their market or lower, while the one on the far right represents brands with more than 30 percent market share. The vertical axis represents the percentage they have had to spend in share of voice ahead of their share of market to achieve that growth—the taller the bar, the more they have had to spend ahead of their share of market to achieve their growth. And what we see is that once you reach a certain size as a brand—20 percent—you start to have to spend proportionately much less to increase your share of market.

We can go on to see that this “law of increasing returns” plays out in a very similar way in four other key dimensions that are relevant to us. The easiest way to illustrate these differences is to map out the brand-consumer relationship into three stages (albeit rather crude ones) and look at the relative performances of the Brand Leader at each stage relative to a second- or lower-ranked brand in the same category. We then come on to look at the impact on profitability.

STAGE ONE: CONSUMER AWARENESS

First, awareness. Who does our target think about first?

Top-of-mind awareness, sometimes called salience, is the proportion of consumers for whom a certain brand comes to mind first when they are thinking about your category. An acknowledged key driver of purchase in lower-interest or impulse markets, like burgers and snacks, top-of-mind awareness is also an underestimated factor in shopping higher-interest categories. General spontaneous awareness, on the other hand (the proportion of people who are aware of your brand at all without prompting), is obviously important at some level to a brand’s success—people rarely buy an unfamiliar brand—but tends to reflect brand size and share of market: It often corresponds roughly to market share.

The assumption marketeers generally make is that the relationship between the two is a linear one—one’s total spontaneous awareness and top-of-mind awareness will rise in roughly equal proportions. Figure 1.2, however, taken from analysis of the relationship between the two among packaged goods brands in France by the advertising agency Lintas (now Lowe) in 1990, shows otherwise.¹

What is striking here is that top-of-mind awareness increases quasi-exponentially in relation to total spontaneous awareness. That is to say, if I as Brand Leader am twice as big as the Number Two or Three, and spontaneous awareness is linked to market dominance, my top-of-mind awareness is on average close to four times as great. By the same token, if I as Brand Leader starting from a higher base increase either of these, my return will be almost exponentially greater, gain for gain, than that of a Challenger making the same gains lower down the scale.

FIGURE 1.2 Top-of-mind awareness versus total spontaneous awareness.

Source: U. van de Sandt/Lintas (now Lowe)

Not only, it seems, do Brand Leaders have more muscle and resources to start with, but it earns them almost twice as much top-of-mind awareness in return. Udo van de Sandt, the French strategic planner whose work this was, found the same relationship existed between “spontaneous brand awareness” and “usual/preferred brand.” We may have to differentiate more sharply than we thought.

FIGURE 1.3 Hypershopping in the truck market.

Source: Cindy Scott/Allison Fisher

STAGE TWO: SHOPPING

What happens when the consumer leaves the house?

What happens is that this law of increasing returns is translated directly into shopping behavior. Imagine our consumer is shopping for a truck, for instance. Well, from a marketing point of view, you would expect that the more you advertised your new truck, the more footfall in-store you could generate compared to the competition. And this is true, up to a point. If one takes the U.S. compact pickup market, for instance, and plots the relationship between advertising spend and shopping across three consecutive years for each brand (Figure 1.3), there will be a close fit along a straight line for every brand—except the Ford Ranger. It alone did not obey the normal laws of proportionate returns.²

Why? Because the Ranger was the compact pickup segment leader and as such enjoyed a dramatically higher share of shopping, even when supported by a comparatively low share of voice. And we see all around us Market Leaders playing this card, knowing the strength of it for an important group of consumers, from Clarins talking in its advertising about its being “The European Leader in Luxury Skin Care” to a Singaporean bus side informing us that “Seoul Gardens is the world’s largest chain of Table Barbeque Restaurants.” If you are looking for a recommendation for somewhere to eat this evening, you can’t argue with that, it seems.

It looks as though, then, as an ambitious Number Two we will need to offer a greater source of differentiation, not just in our image, but in a way that genuinely impacts the entire shopping process. We cannot compete effectively with the brand leader under the existing rules.

STAGE THREE: PURCHASE AND LOYALTY

A picture is emerging. It translates even into purchase and loyalty, albeit in a less dramatic fashion.

Double jeopardy is a brand phenomenon that has been studied and modeled by researchers in marketing for over 45 years across a variety of markets in cultures as diverse as the United States and Japan. It refers to the combined effects of two benefits that high-share brands profit from relative to low-share brands. The first of these benefits is the obvious one: High-share brands enjoy higher penetration (i.e., simply have more buyers) than low-share brands. The second, more interesting observation is that the buyers of high-share brands buy them more often than the buyers of low-share brands purchase those low-share brands (e.g., see Figure 1.4).

The cumulative effect of these two factors taken together leads to relative scale of increase in the number of purchases tending toward the exponential effect observed in the work on salience shown in Figure 1.2. (Some researchers, indeed, have claimed to observe variances for very high share brands greater even than this.)

FIGURE 1.4 Annual penetrations and average purchase frequencies (leading brands of U.S. instant coffee in their market-share order).

Source: MRCA/Professor A.S.C. Ehrenberg/R & DI³

THE CONSEQUENCE: PROFITABILITY

What, of course, all this leads up to is Brand Leaders making more damn money than we do. Figure 1.5 is taken from the Profit Impact of Market Strategy (PIMS) database; it shows the return on investment for a Brand Leader (split into two different kinds—dominators and marginal leaders) compared to second- and third-ranked brands.

FIGURE 1.5 Return on Investment % (average over four years).

Source: PIMS database of performance of 3,679 businesses, 2007, www.pimsconsulting.com

Look at the overall figure for the United States (the left-hand column): While a second-rank brand makes half as much profit again as a third-rank brand, a brand leader that dominates the category makes almost triple that. Or take durables: A second-rank brand makes twice as much as a Number Three, but a dominator doubles that again. I bring this up not just as a stockholder issue, but as a further compounding of the difference in resources between us. Those with an aversion to data tables may find the profitability of a market dominator illustrated a little more vividly by the remuneration of Roberto Goizueta, the late CEO of Coca-Cola, who became the first CEO to earn $1 billion in salary and bonuses alone. That has yet to happen at PepsiCo or Dr. Pepper.

If profit allows a company to make choices, to invest resources in finding sources of future competitive advantage, then this disparity serves to widen the discrepancy between the chips the Brand Leader has at its disposal and the pile we have to play with. As we have seen, each of a Brand Leader’s chips seems to win for it twice as much as ours.

Which is one of the reasons why so many Brand Leaders in fast-moving consumer goods (FMCG) markets, for instance, are exactly the same brands that were Market Leaders 60 years ago.

So what?

The point of all this is not to suggest that it is difficult for second-rank brands to catch the Number One; as we will come to see, that is rarely their objective anyway. Nor is the point that at a crude level we as second-rank brands are outgunned more comprehensively than we thought (though we are). And we have not even come to talk about the kind of aggressive business practices pursued by Market Leaders to diminish the impetus, will, and opportunity for their lesser competitors.

What the law of increasing returns means is that we have to swim considerably more vigorously than the Brand Leader just to remain in the same place. Up to now, this has largely translated itself into conversations about relevance and focus: decisions about communication strategy and customer targeting.

But what if staying where we are in the future will not be enough? What if profitable survival in our category requires the achievement of rapid growth, in a probably static market, in the face of three new kinds of competition? Knowing that to follow the model of the Brand Leader is to help it increase its market advantage?

It would mean that we would need to abandon conservatism and incrementalism and start thinking like a Challenger just to survive healthily. It would mean we would have to behave and think about the way we marketed ourselves in a completely different kind of way. Find a different way of thinking about our goals and strategic objectives. Require, in fact, a different kind of decision-making process altogether.

A financial analyst was quoted approvingly in Financial World for commenting, “There is a certain trust associated with the McDonald’s brand name.” Continued the magazine, “Of course, [the analyst] has paid McDonald’s the ultimate compliment a service brand could hope to receive.”⁴

A service brand? Any service brand? A Brand Leader, maybe, but certainly not a Number Two or Three looking for growth. Of course trust is important—perhaps more important than ever before. But the currencies of quality, reassurance and trust, though they may well have been adequate until relatively recently for dominant Establishment brands, are woefully inadequate as the only basis for the kind of relationship we are going to need with our consumer. Facing the Law of Increasing Returns, Number Two brands are going to need to deal in altogether more potent currencies: those of curiosity, desire, and reevaluation. To succeed, they are going to have to create an emotional identification, a strength of belief in the brand, a sense that we are one to watch or explore—active expressions of choice and loyalty that will make someone walk by the big, convenient facings of the Brand Leader and lean down to pick out the little blue can at the side. As a second-rank brand, we don’t just want to create desire, we want to create intensity of desire.

This demands a different kind of marketing altogether, a different approach. We will come to see that it will demand a change, in fact, not just in strategy but in the attitude that precedes that strategy and the behavior that follows. Fundamental to each decision taken and each way of thinking will be the concept of mechanical advantage—the physical principle describing a machine that manages to create greater output from the same or lesser input. Getting more results, in short, from fewer resources. Not only is this going to be the framework for our entire way of thinking, but it is also going to be the brief for the way we rethink the internal working structure, processes, and behavior of the company and people behind the brand.

And at the heart of mechanical advantage in marketing—its currency, in fact—are ideas.

SUMMARY

There are considerable advantages in being a Challenger: We don’t have to be all things to all people; we can choose a place to stand and something to believe in; we can focus on brilliantly delivering that and that alone—even if, while some people love us, others sail right on by.

But let us go into this challenge with our eyes wide open. The reality is that the middle ground will be an increasingly dangerous place to live—it is not for nothing that Wal-Mart talks dismissively about “the mush in the middle.” To allow yourself to continue to be just another second-rank brand is, by default, to put yourself into the mouth of the Big Fish and wait for the jaws to close. Caught in the new food chain between the new hunger of the Brand Leader, the speculative sharks from other categories crossing over into ours, and the crocodile smile on the face of our retailer, the only path to medium- and long-term health is rapid growth. We are not necessarily seeking to be Number One; there is a perfectly healthy living to be made as Number Two or Number Three in our market (or large market sector). But to be one of those brands, we have to put some air between ourselves and the competition. We cannot be just another middle-market player; we have to be a strong Number Two.

And we can’t get there by behaving like a smaller version of the Big Fish.

THE CONSUMER ISN’T

I rarely go out to lunch. I consider it an interruption in my workday.
I review news clippings during my lunch minute.

Donald Trump¹

If consumerism were a brand, we would say that the person on the street had developed significantly different usage, attitudes, and behavior toward that brand over the past three decades—and yet the vocabulary we still use to talk about it remains essentially unchanged. The old underlying structures and concepts that we still refer to implicitly every time we use words like consumer and audience and category are thus now left fundamentally flawed. These were concepts, after all, coined at the beginning of the packaged goods mass market, when families watched television together and being a consumer meant something because—certainly in the United States—consumerism was embraced by the general public as a healthy sign of being part of, or aspiring to, the middle class. But although our vocabulary fails to acknowledge it, the world is very different today. Consider what has happened to just those three basic concepts—audience, consumer, and category—over the past 30 years.

THE AUDIENCE ISN’T

Ant Farm was a radical collective of American architects/artists, best known for two pieces of installation and performance art. One, called Cadillac Ranch, consisted of a row of Cadillacs buried nose down in Texas. The other, Media Burn, was more of a polemic performance piece, where, in 1975, in front of an invited crowd in a small arena in the Cow Palace in San Francisco, a car accelerated up to and crashed through a stack of 42 burning televisions. The meaning of the event was introduced by the self-styled “Artist President,” who addressed the crowd before the car set off on its last run. “Who can deny,” he asked the crowd with feeling, “[that] we are a nation addicted to television and the constant flow of media?”²

Ant Farm’s prescient cri de coeur was, of course, in vain. More than 35 years later, the addiction to a constant flow of media is one of the defining qualities of modern life across the developed world. To the point, of course, where consumers, particularly the younger generation of so-called digital natives, are experiencing and interacting with many of those media flows simultaneously.

FIGURE 2.1 What does the average global citizen do in a day?

Source: Yahoo! and OMD study³

Figure 2.1 is a chart from a piece of research by OMD and Yahoo!, looking at how an average global citizen (specifically a family-based citizen) spends time during an average day. You can see that if you add together all these units of activity with the time individuals spent on each one, they cumulatively add up to 43 hours of activity per person in what we would have historically thought of as a 24-hour day (including 7 hours of sleep). The reason, of course, is because people are doing a number of these key activities at the same time.

And of course this rate of activity is operating at a time when many consumers feel—in part because of this multiplicity of stimulus—more stressed than ever before. So much has been written about the consumer’s sense of being time-poor and stressed today that it has become a cliché But the fact that it has become a cliché should not blind us to the fact that it is profoundly true and is having a considerable effect on the way that consumers interact with marketing activities, communications, and ideas. One of the most important shifts that has resulted, from our point of view, is the relationship that people are looking for in the media they use.

In a poll a few years ago, 94 percent of all American adults stated that a primary use of their free time was to recuperate from work. If true, this is one of the most important pieces of marketing data to have emerged in recent years, and it describes a profound shift in the way consumers use one of the principal marketing tools at our disposal, namely, the television. It implies that there has been a profound shift in our society, from a work/leisure society (i.e., one that self-consciously divides itself between two basic types of activity, work or leisure) to one that divides its time between three: a work/recuperation/leisure society.