Wherever there is a market, there will be competition. In fact, it won’t be wrong to say that in the business world, the term “market” itself is synonymous with competition. If a new business is entering a market, there will be competitors up front who have already captured the market share.
So, what does a new business do? Should it quit because of fear of competition? NO, the ideal strategy would be challenging those competitors. This will help the business in two different ways;
- A business challenging the existing competitors will not only give them a tough time, but it will create fear for new entrants, working as an entry barrier.
- With this strategy, the new business will be able to climb the success ladder gradually.
The next question is, how can a new business effectively challenge the competitors? Are there any specific strategies that can help new businesses or existing businesses entering new markets to combat market competition?
The answer is YES. If your business is going through the above-mentioned scenarios, then the market challenger strategies can be very helpful to your cause. Sounds interesting? Let’s dig a little deeper!
What Are Market Challenger Strategies?
Market challenger strategies, in simplest words, are the marketing strategies that a firm adopts to challenge or attack the market leader or immediate competitors to earn projected revenue and capture market share. That firm can be either new in the market or holds a runner-up, third, or even lower position in the competition.
The firm that challenges other firms is often called a “market challenger.” Here is something very important. Can a firm at any position challenge the market leaders? No, it doesn’t happen this way, and this is where most firms make a mistake.
If a firm is just entering a market, its competitors would be low position firms. A new entrant simply cannot challenge the industry leader or the runner-up. However, if a firm holds 4th or 3rd position in market competition, it can target the industry leaders.
5 Market Challenger Strategies with Examples
There are different competitive strategies for challengers to challenge those who are ahead of you in the market. However, we are going to discuss the top 5 market challenger strategies with real-world examples.
Frontal Attack Strategy
Frontal attack strategy is common in industry leaders where one market leader takes on the other one directly. That is, if one brand launches a product or service, the other one retaliates with the same kind of product, price, and promotion activities. The responding firm may reduce the price of its counter product while offering the same quality and value. Frontal attack strategy, in short, is a game plan where one firm takes on the other one based on the competitor’s strength.
Pepsi and Coca-Cola
Pepsi and Coca-Cola have been “at war” for decades, and both have captured immense global market share. Both companies have a diverse product portfolio, and if one brand launches a product, the other one counterattacks with a similar product. For instance, when Coca-cola introduced Diet Coke, Pepsi responded with Diet Pepsi.
Amul also went for a frontal attack strategy when the company launched its Amul Mast Dahi and Amul Kool at lower prices but with the same quality to compete against its competitors.
Flank Attack Strategy
In a flank attack strategy, a company targets the weak points of its competitor. The market challenger identifies and targets the weaker areas of its competitors considering segmental and geographical aspects.
The challenger not only tries to identify the weak spots where the competitor is underperforming but also determines the untapped areas where the competitor has no presence. Once identified, the challenger will push its products or services to fill the void.
“Sampoorna,” the color tv from L.G, is a perfect example of a flank attack strategy. The company launched this product specifically for people in rural areas while the competitors failed to do so.
Other common examples of companies following flank attack strategy include Apple vs. Microsoft, Intel vs. AMD, etc.
Bypass Attack Strategy
A company following a bypass attack strategy simply outplays the competitor. That is, a firm doesn’t identify the weak areas of its competitor or launch counterattacks. Rather, the firm innovates a new product and creates a segment of its own. However, there are other ways to bypass the competition completely, such as;
- Expansion to the uncovered/untapped markets.
- Diversifying with the help of unrelated products.
- Updating or modernizing an existing product with new features.
Of course, the competitors will follow later, but until then, the “trendsetter” will be able to create a brand identity in that market.
Aquafina from Pepsi Co.
The mineral water brand Aquafina from Pepsi Co is a great example of a bypass attack strategy. The company totally invested in a new market, and Coca-Cola followed later with its own mineral water brand.
Apart from that, iPod from Apple company completely bypassed the walkman from Sony.
Encirclement Attack Strategy
A business that follows an encirclement attack strategy will go with all guns blazing. In this strategy, one competitor attacks the other one at all fronts simultaneously. The competitor may target the strengths and weaknesses at the same time and do everything in its capacity to overthrow the competition. In fact, encirclement attack strategy is a combination of both flank and frontal attack strategies.
The challenger may launch different marketing campaigns and force the competitor to go on the back foot. The core purpose of the encirclement attack strategy is to create long-term market dominance.
The eCommerce market can be an excellent example of the encirclement attack strategy. eCommerce companies often reduce their profit margins to overthrow the competition on the basis of turnover. They would try to go all lengths just to capture the market share and boost their customer base.
Guerrilla Attack Strategy
To be honest, this one is more like a “dog-fight” where competitors try to demoralize or harass each other with the help of any or all conventional or unconventional methods.
Coca-Cola Vs. Pepsi
This punch line, “Nothing official about it,” was Pepsi’s counterattack when Coca-Cola became the official partner of the world cup.
Advantages Of Being Market Challengers
- Market challengers can easily capitalize on the mistakes or weaknesses of the competitors to capture the market share.
- Other companies, especially new entrants, consider the market challengers as the aggressors or proactive firms that are willing to overthrow any competition.
- Product-to-market lead times are pretty shorter.
- Development and research costs are relatively lower.
Disadvantages Of Being Market Challengers
- The customers will always compare the market challengers with market leaders. That means the challengers will have to be at the top of their game all the time.
- It becomes difficult for challengers to secure an irreplaceable position in the market as they are not the primary choice of customers. They are good as long as they can provide the same or better quality at lower prices.
- If the challenger fails to deliver the product it promises, customers will not recognize the firm as good enough to compete with the market leaders.
- Challengers may have to suffer financial losses or lower their profit margins to stay alive in the competition. For instance, if a brand tries to attract customers and overthrow competition by significantly lowering the prices, it will be difficult to revert to more profitable prices.
- Sometimes, a challenger strategy (such as the guerrilla attack strategy) may go wrong because a brand may end up hurting customers’ feelings.