Challenger Brands: Change is guaranteed. Growth is optional.
Do you remember where you were on March 13, 2020? I do.
On that ominous Friday the 13th, the President of the United States declared a National Emergency concerning the Novel Coronavirus Disease Outbreak. Most of us all left work (or school) early that day. His order would soon shutter retailers, close classrooms, turn away parishioners and even stop the NYC Subway for the first time in 115 years.
We were told that we would be back to “normal” in a week or so. But life turned into a bit of a rollercoaster and the COVID Pandemic story has been quite the “thrill ride.” 🎢
Ready to get off?
So much has changed. I’m not here to rattle off stats like 4.3 million new jobs created in ’21, the S&P 500 is up 73% since 3/13/20, and lots of zingers like those via Statista. I’m here to talk about challenger brands and how they continue to grow, outpace competitors and build growth via the entrepreneurial spirit in all of us.
[DYK that I consider Jeff Mard a Challenger Brand? Well, now you do.]
I chose to write this article because I want to spotlight the opportunities created by the COVID pandemic. And let me be 100% clear, I am by no means naive to the terrible loss and suffering the world has undergone. But I believe the second anniversary creates a window to look back and reflect on how far we have come together. ❤️
Looking for inspiration to fuel this article, I attended the 2022 Challenger Brands conference hosted by AdWeek. Throughout the three-day virtual conference, I listened eagerly to brands, technology providers, and thought leaders talk about their businesses. How did they survive? Evolve? Thrive?
If you read my last piece, Love is a Four-Legged Word, you know that my writing style is conversational. And each section comes with key takeaways for the reader to consider. This is not a listicle article. This article is designed to help you get 1% better (every day). That’s my modus operandi.
I’m happy to kick off this article with some insights from one of my favorite brands: TOMS. I was fortunate enough to have Amy Smith, the Chief Strategy & Impact Officer, share her perspective on this topic:
“The start of the pandemic was a challenging time that provided many with the opportunity to pause, reflect and gain perspective, and this was no different for TOMS. In 2021 the brand turned 15 and was also celebrating the milestone of impacting 100 million lives through our One for One giving model. These two milestones, coupled with the pandemic, made it clear that it was time to reflect on what we had learned about giving and evaluate our impact on the world.
The big questions for us included — are we making the greatest impact possible? Could we be doing more differently? After careful consideration of community-driven feedback and market research, TOMS decided to evolve our giving. Instead of giving shoes One for One, TOMS is committing 1/3 of profits to grassroots goods, developing deep partnerships with local organizations, and providing them with cash grants. We know that community organizations and leaders best understand the challenges their communities face, but also know they don’t always have the resources — that’s where TOMS can support. This evolution provides us the flexibility to support what is needed most in a community.
The power of this new proposition was demonstrated through the TOMS COVID-19 Global Giving Fund which generated over $2 million in support of global pandemic relief efforts. Moving forward, TOMS will continue to work with organizations led by those closest to a community’s obstacles and opportunities — driving change from the ground up with a focus on mental health.”
With the above paradigm shift in mind, I chose to bucket the remainder of this article into three areas propelling Challenger Brands: Commerce, Content, & Community.
Commerce 💰
Buying patterns have shifted, 70% of purchases start on Amazon.
Those in leadership positions continue to wield their power to shape existing distribution channels. But we have seen Challenger Brands keep up with the big kids on the block by jumping into new eCommerce solutions (Shopify, Social Commerce, etc.). And building a culture tethered to a test and learn mentality.
Unfortunately, out of the gate, the challenger brands lacked the infrastructure and supply chain to meet this “new normal” (don’t you just despise that phrase?). Category leaders went hard and exhausted their resources, consumers bought every last roll of Charmin, cans of Lysol and the shelves were soon barren.
But these behemoths soon realized all that process, technical debt, and antiquated distribution systems would soon plague their business. This has led to a surge in Web3 tech adoption (NFTs, Crypto, metaverse, etc.). By the Summer of 2020, it was the challenger brands that started to grab market share. Aided by federal/local grants (learn more) they stayed strong, evolved their business, and came back stronger. This was further aided by a 111% surge in YoY Private Equity deals in ’21; and lest not forget, the PE market is sitting on $2.3 Trillion in dry powder (Harvard Law Forum).
Just ask Westward Whiskey founder Richard Black:
“When the pandemic hit, our business halted. Meanwhile, the category leaders had the infrastructure to leverage their supply chain partners to take advantage of the surge in “stocking” that happened as consumers bought in bulk. And at the same time, we pivoted and started to test and learn and pushed our business online.
What we later saw during the pandemic was our business took a major turn towards growth in Q4 ’20 as our mix of off-premise tasting and digital solutions amplified one another. It created a snowball effect whereby we had our best year in ’21. And the momentum has continued into ’22.”
Surbhi Martin, the VP of Marketing at Danone North America had this to say:
“Consumers vote with their dollar. They believe their purchase has a direct impact on the world.”
We’ve seen commerce continue to disrupt our world. Is it any surprise that Tobias Lütke, CEO of Shopify is now on the board of directors for Coinbase? It shouldn’t be. Can you accept bitcoin? District NHV does. And so should you. Check out Shopify’s new plug-in with Coinbase.
I will close out this section with a powerful message from Shopify:
“Don’t forget about the magic of in-person experiences: in-store shopping is ramping up again. But it’s not about one or the other — consumers want it all. These days, commerce is omnichannel. The best brands understand that digital and physical retail don’t operate as silos. It’s all just retail. Your customers want to be able to order online but return in-store, or look at a product in a showroom and buy it online. Over the next year, 54% of the consumers we surveyed say they’re likely to look at a product online and buy in-store, and 53% are likely to look at a product in-store and buy online.
Future-proof yourself further by building diverse business relationships across your supply chain, shipping, and fulfillment networks. And give yourself a Plan B, C, and D to build resilience in your supply chains. Most importantly, make sure you can deliver on your promises to your customers. According to our survey, 66% of them are already aware of supply chain delays, and they’re looking for transparency. Forty-five percent of shoppers are actively looking to shop from businesses that clearly show anticipated delivery times.
Perhaps the largest opportunity ahead is to differentiate yourself with sustainable business practices. In the past year, nearly half of customers chose to buy from brands that have a clear commitment to sustainability. Studies have shown a 71% rise in online searches for “sustainable goods” globally since 2016.
It could be said that if you don’t go green, you’ll go red — so seize the chance to build a sustainable business.”
Key Takeaways 📝
- Future proof. Don’t get caught flat-footed. Have at least two or three trusted resources to help you scale in critical business operations. Develop contingency plans and processes.
- Reduce friction. Make it easy to convert. Every step should be logical, measurable, and adaptable to change (QR codes, etc.). Consider alternative payment solutions. DYK, the “Buy Now Pay Later” (BNPL) solution is exploding within eCommerce?
- Find the open space. As Web3 grows roots, evolve your customer engagement strategies. How soon until you authenticate users using Ethereum (and the MetaMask browser extension)? We will soon enter a multi-currency world, where you can pay with your currency of choice.
- Identify absolutes. eCommerce will always go up. What will your share be? Do you have the infrastructure to support continued growth?
Content 🎥
For challenger brands, Authenticity is a nice too must-have.
Carey Collins Krug, the CMO @ Abercrombie Brands had this to say: “People need to experience the journey to trust its authenticity.”
Building on that, Alicia Carey, the Global Head of Agency Development at Microsoft Advertising, said “Find your return on purpose.” Talk about throwing CAC, LTV, and Churn out the window. LOL.
I recently sat down with Mark Beal, (Assistant Professor in the Rutgers University School of Communication and Information) and he had this to say:
“There is no better time in the marketplace than now for challenger brands with the emergence of Generation Z, the next most important and coveted consumer segment. Gen Z is simply not looking to support customers and advocate as influencers for established category-leading brands and companies. With over $360 billion in spending power, Gen Zers are no longer exclusively students. In 2022, the oldest members of Gen Z will turn 26. Over the past several years, hundreds of thousands of Gen Zers have graduated college, launched careers, earned full-time salaries, and have evolved into informed and discerning consumers.
In my next book, Gen Z Graduates To Adulthood, the oldest members of Gen Z tell me they are looking for something different in the brands they support than previous generations. They are seeking to support brands that prioritize ‘purpose’ in a way that contributes to better communities, society, and the world. Gen Zers are also looking to be engaged via non-traditional media channels and unique experiences, access, and events not mainstream mass television advertising.”
As a challenger brand, Digital Surgeons had some clients pause at the start of the pandemic. BUT, soon we saw a surge in content production demands. However, we couldn’t go onsite to shoot footage. And we needed to scale while doing post-production virtually. As a result, we purchased Steve Walter Productions, folded it into our campus, and have since added a second studio to our space.
And we were not alone. I spoke with my friend Eran Lobel, Founder of Element Productions:
“When the Pandemic hit, we were not caught on our heels. The nature of our industry prepared us to pivot our business around the new challenges. We learned real quick that capturing quality video was evolving fast and doing post-production remotely was feasible for brands like Chewy, John Hancock, and Simplisafe.
We knew the creative would need to stand out, so we leaned into our flexible & nimble approach with content that simply worked. Clients were thrilled and we managed to survive the chaos and keep our team intact.
We were fortunate to help many non-profit organizations produce 30 to 60 minute “Saturday Night Live-Esque” virtual experiences to help raise millions of dollars towards COVID Pandemic.”
Many of the larger production studios were hit harder and had to cancel shoots in LA, Austin, and other hot-beds. Check this article from Vanity Fair to better understand how the entertainment industry survived.
Talking about larger businesses, Unilever recently reported eCommerce grew 38% to 12% of all sales in ’21. That’s significant. Consider this via their Q4 ’21 quarterly report:
“We have delivered a good quarter against strong comparators, with underlying sales growth of 2.5%. The combination of our strategic choices and focus on operational excellence continue to drive competitive growth. Underlying sales growth is now at 4.4% for the year to date and we are confident that we will be well within our multi-year framework of 3–5% for the full year.
We are using our scale for good… driving superior performance with purpose-led, future-fit business.”
The first-mover advantage is real. And it’s spectacular (Seinfeld-Esque quote here; IYKYK). Unilever has reframed its vision: This is a big deal IMHO. And it is similar to TOMS’ pivot.
There are a few surefire ways to create compelling content. Here is one universal truth I found. But before I spill the tea, I’d like for you to pause for a moment and think about the last time you purchased an item.
Why did you buy that item? Are you sure that’s the reason?
Let me do a quick roll play for you. Two weeks ago I bought a new pair of Nike shoes from an Instagram Advertisement. Let’s ask why (five times).
Q1: Why did you buy them? A1: because I needed new sneakers.
Q2: Why did you need new sneakers? A2: because my old ones were not supportive.
Q3: Why did you need supportive sneakers? A3: because my shins hurt when I run.
Q4: Why do you run? A4: because I want to lose weight.
Q5: Why do you want to lose weight? A5: because I’m happier when I can fit into my favorite jeans.
Happiness is at the root of most decisions. And it comes in many form factors. Our collective job is to create content that connects with its audience and cracks the happiness code.
Key Takeaways 📝
- Find your purpose. Stand firm, unwavering, and connect your brand experience around a purpose. People may not remember what you say, but they will remember how you make them feel.
- Be you. Do not pretend to be something or someone you are not. Today’s consumers crave authenticity. It feeds their reason to believe in your brand. They want to buy into something, not just buy something.
- Add value. Advertisements or sponsored content are no different than regular content. I love this quote from Howard Gossage: “The real fact of the matter is that nobody reads ads. People read what interests them, and sometimes it’s an ad.” Be interesting.
- Fail forward. Take chances. Ride the meme-trends, hack the IG reels, go live on Twitch… it may not always work, but the next time you take a chance, you are a bit more likely to succeed. Practice makes perfect my friend. Consider how NFTs can help build your business, your brand, and your relationships with current customers; peep this article from 2/28/22 by the Harvard Business Review: How your brand should use NFTs.
Community 🏬
The definition of community evolved.
The pandemic drew communities in tight. At first, it was zoom happy hours, clubhouse calls, and birthday party parades. People were searching for happiness. It’s no surprise that the animal shelters emptied. The pet industry demonstrated a double-digit CAGR during the pandemic.
Steve Elwell, our client from Freshpet had this to say:
“There aren’t many “silver linings” when we talk about the pandemic; it’s inflicted an incredible amount of pain on people, including many of my teammates at Freshpet. But one hopeful story that emerged in all of this was the fact that when we were feeling isolated and alone, we could still rely on our pets to help us get through the days. Adoption of cats and dogs skyrocketed during the pandemic, and as more people were home spending more time with their pets, they finally got a chance to consider how important these little guys are to our lives, and how much we want to do what we can to return the favor.
So in that sense, our work in bringing people fresh, healthy meals for their dogs and cats became a way to respond to that human-animal bond, which had strengthened so much during this difficult period. And it gave me a chance to adopt Emmett, my 2-year-old rescue mutt who I love more than anything.”
Turning our heads to the virtual nature of the COVID communities that sprung up, we have seen the proliferation of social (TikTok), technology (QR codes called… they’rrrrrre baack!), and commerce redefine how we engage. Entire communities that once met at a bar, or in a church adapted to a tech-first approach and craved a trusted (non-Facebook) place to stay connected.
We’ve seen online community platforms like Discord explode. These niche networks once capped at 25k online members per server, were expanded to meet the rising demand. As you read this sentence, there are now over 150 million monthly active users (390 million registered) sending millions of messages.
Those familiar with Discord’s meteoric rise know that it happened because they saw open space in gaming communities. Their success was fueled (largely in part) by the growth of e-Sports (Fortnite, Overwatch, and Legends) and their lackluster community tools within the games. Discord added popular communication features, siphoning off Twitch users.
Today, Crypto zealots continue to flock to Discord channels to learn how to get rich quickly, find the next Bored Ape. Discord’s love-hate relationship with Crypto is fascinating. And complicated. I (almost) got tricked into sending .17 ETH for an Undead Pastel Ape last month. Yeah, no typos on that NFT name. The market cap for that collection is 4,300 ETH ($11.6 million) as of 3/1/22. BTW, I do own a few Coachella NFTs and my Business Ape is sharp! I’m HODL.
With content creators making an average of $88,043 you can infer one of the reasons for this change. People needed to feed their families and lean on their network for help. This combined with many of the insights I already unpacked in this piece has led to an emphasis on building growth through mid-level influencers (e.g. 50–500k followers on Instagram).
Treat your influencers as an asset that is much more than an athlete, a cook, an actress. Invest in that relationship. Nikki Neuburger, the CMO at Lululemon said:
“Brand/ambassador relationships are partnerships, not transactions. Valuing the athlete/influencer as a whole person creates a deeper and more authentic partnership. Prioritize the long game. Integrate the influencer fully into the brand, as opposed to a one-and-done approach. Widen the aperture. Influencers reach far beyond their disciplines. Consider how they can offer valuable insights beyond the audiences your brand is currently reaching.”
When it comes to creating content, it’s not foreign anymore for brands to also partner with established gaming platforms. Consider this Metaverse Trend from the Harvard Business Review:
“Roblox will help build careers. We know many developers who employ teams of our community members, working entirely through chat and earning seven figures from their projects. Many are already collaborating with top global brands and receiving prestigious awards. For example, cSapphire, one of Roblox’s digital fashion creators, recently won the British Fashion Council’s first-ever Fashion Award for Metaverse Design.”
This trend is only going to gain momentum. American Eagle just rolled out a new clothing line in the Metaverse: AdAge Article. I still miss the old school mall scene (best mall ever) and shopping at Spencer Gifts, Herman’s, and catching a flick at the General Cinema in Framingham, MA.
One of the hardest-hit communities was the health and wellness category. Their content needed to evolve quickly! While mainstays like Equinox, Gold’s Gym, and 24-Hour Fitness took a hit, tech Cinderellas (Peloton enters your DMs) quickly scaled their operations model. And yes, there may be some recent speed bumps, check Acquired podcast, but these customer-centric community experiences are not going anywhere. These brands will test, learn and evolve, cause that’s what challenger brands do.
I also enjoyed learning how some of the larger health club chains met their customers where they were. Through empathy and compassion. Edward Bourelly, the VP of Marketing at Planet Fitness, had this to say about their involvement over the past two years:
“Brands should always lead with their values no matter the circumstance. When all of our gym locations closed, our national team immediately launched a highly successful campaign called “United We Move” which entailed free and fun 20-minute workouts that anyone could partake in on Facebook and YouTube. The campaign had workouts led by professional athletes, celebrities, trainers, mascots, etc. and they were even done from most of their homes. The brand continued to focus on keeping people moving even if they weren’t members or in our gyms.
Planet Fitness is a national brand, but our gyms are entrenched in our local communities. The pandemic brought this to light even more so as franchisees continue to support local charities, community groups, teachers, and first responders with donations, sponsorships, and gym access.
The gyms are also essential to communities in providing a place for people to exercise, not just for the physical benefits, but for the mental wellness aspects. Kudos to our gym staff that work tirelessly throughout this pandemic to provide this essential service while adhering to local policies and ensuring that our gyms are as clean and safe as possible. They really are essential workers.”
Another way to consider your community efforts is to think about the challenges they are facing. Beckley Mason, the CMO at Athletic Greens said:
“Obsess the real-life problems that your consumers face to remain timely and relevant.”
Sometimes the answer is so simple, and we complicate it with marketing jargon… just be there for your customer.
Today, the winning brands are doubling down on brand experiences that bring the community closer together. This led to the “all-in” move by Facebook on Meta. The jury is out as to what the metaverse truly is, but I’m not betting against Zuck. Perhaps the metaverse will be future-proofed against future commerce delays (i.e. pandemics).
Getting back to another Challenger Brand story I found fascinating, Matt Lindner, Co-founder & CEO of Crafthouse Cocktails saw the pandemic pave the way for a more holistic community-driven experience:
“In Q4 of 2019, we went through a rebrand. We swapped over the brand expression, positioning and even updated the packaging from glass to aluminum. We were about to go big in Q1 of 2020 with a large on-premise activation tied into three of our key partners at Marriott Bonvoy, Virgin Voyages, and Amtrak. Unfortunately, COVID put a halt to that effort. We needed to pivot quickly and unforeseen supply chain challenges slowed us down. We even had to shelve a few partnerships with forward-thinking distribution partners (e.g. GoPuff).
During the next couple of quarters, we shifted our business model to a retail-focused environment, rolled out eCommerce, and partnered with Reserve Bar to aid in DTC sales. Fortunately, right at that time, our core consumer was looking for a more convenient solution to making their cocktails and they started to move away from their comfort brands like Titos, Smirnoff, and Cuervo and were looking to discover something new (yes, flavored seltzers aided in this trend). As it turned out, our premium pre-mixed beverages offered the perfect bevy. We have been out since 2013 and knew the day would eventually come where the demand would meet what we knew for a while was a need.”
During the pandemic, quality content was so critical, across every industry. Dark Horse CPA founder Chase Birky had this to say:
“Accountants are not known for being social media influencers or YouTubers. During the pandemic, however, the information and insight accountants had on Covid relief legislation and related tax breaks became highly sought after. After receiving countless emails containing questions about these issues, we realized there was a sales funnel to be created by publishing videos to YouTube and Instagram that kept people in the know about what they needed to do to maximize their share of the loans, grants, and tax breaks out there. Beyond fueling growth for the firm, the reward was in helping small businesses keep their doors open.”
BTW, I mentioned my original theme took many turns. For a while, I was writing how there was no such thing as challenger brands (because tech leveled the playing field). I still think there is, but I also think Paulie Dery, the CMO at Yeti said it perfectly when asked about his brand:
“We are not a challenger brand. We are a cult brand.”
That’s deep, right!?!
Key Takeaways 📝
- Find your Northstar. Once you know who you are, create a community that is authentically you and solves real human challenges. And build in other key metrics that matter (go beyond CAC, LTV, ROAS, and traditional media metrics)… did you know “time” is one of the most unattainable luxury items that you can never get back?!?
- Don’t waste time. We are all competing for our target’s attention. If you waste someone’s time, complicate the experience, or just don’t do what you say you will do… your business will suffer. Anticipate your community’s needs. Meet them where they are with best-in-class brand experiences.
- Convergence is happening all around us. Businesses must consider marketing vehicles a means to engage, educate, and ensure their users/consumers understand how to get the most value out of their products. Having a sense of community helps ensure the rising tide lifts all boats… and everyone feels fulfilled.
- Content should feed your brand purpose. Your brand is a promise to your customer.
#1 Takeaway 💎
This comes via Richard Dickson, the President & COO at Mattel:
“Evolution makes a brand relevant; purpose makes a brand immortal.”
I encourage you to like, share, and engage with wherever you see this content.
If you’d like to talk more, find me on LinkedIn or just email me to talk about growth. 🚀
