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Subcategory creation lets challenger brands come first
For a challenger brand, a market leader that owns the link between its brand and the category is nearly impossible to dislodge. Challengers that compete head to head for that position are fighting the one contest they are least likely to win. Subcategory creation offers a way out. So how do you frame a space where you come first?
Why market leaders are so hard to dislodge
Good brand marketing strengthens the link between a brand and a category. That investment pays off when a buyer is in a buying situation and the brand comes to mind. Once a market leader wins that top position, in the buyer's mind and in market share, it is nearly impossible to dislodge.
That is the problem every challenger inherits, and it is why how challenger brands position to beat the market leader starts from a different contest rather than a better attack on the same one.
How challengers fight where they can come first
Instead of competing head to head for the top spot, challengers need to fight where they can come first. That comes down to three moves.
- Limit comparisons with the market leader.
- Narrow your competitive set.
- Frame a new space, or subcategory, around your strengths.
Each move reduces the number of brands a buyer compares you with. The third does it most completely, because a subcategory with you at the front of it has no leader but you.
Three challengers that framed a space and came first
The clearest examples are the ones that can be said in a line.
- Avis: the first car rental that cared.
- Braniff: the first airline that made it fun to fly.
- T-Mobile: the first uncarrier.
None of the three claims to be the biggest or the best. Each claims to be first at something the leader was not trying to do. Why that kind of claim makes brand marketing more effective is set out in why good positioning makes brand marketing work.
"Coming late into markets and hoping to steal share on the back of 'a better product at a lower price' is virtually doomed to failure. Winners make markets. And to make a market means to bring something new into existence." Jules Goddard, Uncommon Sense
When subcategory creation is the right move
Subcategory creation matters most in one situation. When a category is dominated by a single large brand that commands the majority of market share, a challenger should limit comparisons with it at all costs.
Subcategory creation shields a challenger from the incumbent by positioning it not as a substitute but as an entirely new class of offering. A buyer comparing substitutes defaults to the leader. A buyer choosing a new class of offering has to consider the challenger on its own terms.
What makes a subcategory hold
Not every new label creates a new class of offering. A subcategory has to pass two tests.
- It offers buyers a unique and desirable proposition.
- The differences between the subcategory and the main category are easy to understand.
Fail the first and the subcategory is a niche nobody wants. Fail the second and buyers file you back into the main category, alongside the leader you were trying to escape.
How Formula E created City Street Racing
Formula E is the clearest worked example. With slower cars that made no noise, it was drawing unfavorable comparisons with Formula One. Judged as a substitute for Formula One, it lost on the very attributes Formula One fans valued.
But those same qualities offered an advantage. Silent, emission-free cars could race on the streets of the world's capitals, which Formula One cars could not. Formula E framed a new space around those strengths and created a new category of motorsport called City Street Racing.
The positioning then shaped the business, not just the advertising. Following the repositioning, a policy decision was made that the sport would only race in urban city centers, and on-track innovations such as power boosts were added to broaden its relevance with a younger audience. Formula E went on to unlock triple-digit increases in viewership and attendance and gained a $900 million valuation. The full story of how that advantage was found is in finding your hidden advantage.
Formula E stopped losing to Formula One the moment it stopped being a slower version of Formula One and became the first City Street Racing series.
Where subcategory creation fits
Creating a new subcategory is one of six ways a challenger can unlock an advantage. It is the most complete way to avoid the leader, but it is not the only route to a new space. Delivering new combinations of value, the route Turkish Airlines took against the Gulf carriers, also creates new subcategories of choice. It draws growth from value customers trading up and premium customers trading down, rather than from the leader's core buyers.
Either way, the principle is the same. A challenger that cannot come first in the existing category comes first in a space it defines. The other five are set out in the six sources of competitive advantage.
Adapted from How challengers can position for growth, a Creative Business Company whitepaper.
