Attacking the market leader

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Answer - Not unless you have some very powerful friends. Attack the market leader in a specific market segment first, using a proposition that is clearly differentiated from that of the market leader, and maybe even the direct opposite of their proposition.

Key Action Points

To attack the market leader, use its strengths against it:

1. What are the generally held assumptions about the market place? List the most obvious
2. What are the unassailable strengths of the brand leader? Are they really?
3. What would the brand leader never ever do? Can you do it? Brand leaders virtually never develop the next big thing within a market place
4. Reverse these "givens" and what do you have?

In more detail.....

Although brand leaders tend to feel paranoid, in practice they should have it made. The 3-2-1 rule suggests that they could well have three times the market share of their next competitor, they will usually be capable of charging a substantial price premium on their products/services over the competition, and their volume sales dictate that they benefit from substantial economies of scale as the lowest cost producer. A recent survey by Taylor Nelson Sofres found that across a series of market categories the brand leaders today are the same as they were 20 years ago, only more so.

So, market leaders can sit back with a proven brand proposition, reinvest their profits in renewal activities, and update their image periodically. Or can they?

One of the fates of brand leaders is that they get bored. Keeping the same old message going year after year is not a career enhancing activity. The newly appointed advertising agency will want to prove its credentials with a radical new campaign, appreciably "better" than the last. Internal politics begin to render the brand leader purblind to market imperatives and thereby blunt competitiveness.

In this environment, there are at least four branding strategies for attacking the market leader:

1. Partnering/merger & acquisition
2. Beating the brand leader at its own game
3. Undercutting the brand leader on price
4. Assumption reversals

Partnering/merger & acquisition

The current model for attacking the brand leader is to join together with another brand and to become the brand leader overnight by sheer weight of combined sales and organisation. Except in the most transparent of markets where only size counts (should such a market exist), this is a short term strategy. Most mergers & acquisitions fail. In fact, they fail about as often as do new products (75-80%). Culture clashes, internal politics and failures of co-ordination will mostly undermine any advantage.

However, there are effective strategies within this framework. Daimler Benz created a joint venture with Swatch watches to develop the Smart car, combining in brand terms the Daimler Benz engineering with the Swatch flair. While the Smart car itself is a cult success, the thinking behind it also led to the very successful A Class Mercedes Benz, and probably to a different way of approaching the mass automotive market. In fact, this sharing of knowledge may, in the long term, prove more fertile than the larger, more structural Daimler Chrysler merger.

Beating the brand leader at its own game

Every brand leader knows that sooner or later a competitor will try to do what it is doing better, and possibly cheaper. However, full frontal attack is potentially massively expensive and unlikely to succeed except after a long war of attrition.

Several Japanese brands achieved this in the 1960s-80s, especially in the electronics and automotive (including motor bike) markets. They did so through weight of investment, a long term vision, and leaner manufacturing that offset the residual economies of scale of the brand leaders. Finally, brands such as Sony, Matsushita, Hitachi, Honda and Toyota attached to themselves the chic originally monopolised by their rivals. Korean brands such as Samsung, Daewoo and LG Electronics attempted the same strategy during the 1990s, but were undermined by the collapse of the economic infrastructure in the Far East towards the end of that decade, as were many Japanese brands.

If you have a huge long term vision and credit facilities, this may be the route, but it will be a long road strewn with financial potholes.

Undercutting the brand leader on price

Brand leaders are generally also the premium price leaders. If they weren't, the market pricing structure would collapse into commodity selling where no-one makes a profit.

This leaves an umbrella pricing structure under which low cost brands can lunge into the market. Retailer brands are frequent users of this strategy - you can buy the brand leader at a price, or you can buy much the same thing under our shop brand. This will usually accord you a certain level of share, but not make you the brand leader.

Highly engineered lower cost mass market brands have also achieved significant market share, but the really successful ones do not lead on price; they only have lower prices as part of their offering. In some way or another they are also better attuned to a key segment in the market place. In the computer market, Dell and Time Computers have taken significant market share off the old IBM and Compaq brand leaders, but Dell's primary positioning is direct-to-the-consumer customisable products and services, based on a radical business re-engineering strategy. Virgin Atlantic and EasyJet are brands first and lower cost second. Virgin Atlantic works off an added luxury lower cost platform, and EasyJet cuts both costs and non-added value services that allow customers to buy what they really want.

The successful players in the Internet market have usually followed this strategy. Amazon.com offers discounted books, but with true understanding of the customer. e-Schwabb took a robust understanding of the investment market, and combined it with a hassle-free delivery mechanism that was also lower cost to the customer.

If you can develop both an attractive proposition and a competitively-costed process for delivering that proposition, you should be well placed in the long term. Rushing in going "cheap, cheap" rarely does it. How many Price Buster shops have you seen going bust?

Assumption reversals

The most courageous strategy for attacking the brand leader is the assumption reversal strategy.

Ask your customers "What do you take for granted?", then ask "What would happen if we did the opposite?". This has been the real strategy underlying the success of Dell, EasyJet, Amazon.com, Body Shop, IKEA and First Direct. Yes, they offer cheaper products, but they also shift the paradigm:

• Dell saw a market where all computers were packaged goods sold through dealers. It created a direct channel of communication to the consumer and offered reliable, customised products
• EasyJet identified a market which was over-priced and with poor institutional service. It cut out the bureaucratic elements of the service that people didn't want anyway. Rumour has it that Go is regarded by loyalists as a better service airline than BA/British Airways. On Go you get to buy the food you want to eat
• Amazon.com cut out the walk to the high street shop. While bibliophiles may love dusty shelves and leisurely browsing, some people just like to read books delivered to them from their desktop the next day. They also like an ordering service that immediately acknowledges the order and keeps you informed of progress - a much higher level of service than will have been experienced by most people ordering books through high street retailers
• The BodyShop attacked the quasi-scientific, conspicuous spender, underpinnings of the established cosmetics brands who turned up on television either as white-coated lab technicians or as glamour-pusses. Body Shop went for natural down-to-earth products sold by a radical do-gooder with a liberal save-the-world foreign policy
• IKEA attacked conventional finished furniture retailers by creating a cheap flat-pack brand based on family value and family values, rather than quilted luxury
• First Direct countered the assumption that you have to meet your bank manager face-to-face to create a trusting relationship. The last thing on earth most people want is to meet their bank manager

Several of these brands achieved significant market share fairly rapidly by not being mesmerised by the seemingly unassailable assumptions of the market leader. Most strong brands are both loved and hated. Where they are hated lies an opportunity for substantial market share opportunities.

So, to attack the market leader, use its strengths against it:

1. What are the generally held assumptions about the market place? List the most obvious
2. What are the unassailable strengths of the brand leader? Are they really?
3. What would the brand leader never ever do? Can you do it? Brand leaders virtually never develop the next big thing within a market place
4. Reverse these "givens" and what do you have?

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