Pioneer vs. Challenger Brand : Impact on Customer Acquisition Strategy
Customer acquisition is a key challenge for Start-Ups. An entrepreneur should tailor his or her acquisition strategy depending on whether the brand is creating an entirely new category or trying to gain a share of the existing pie.
One of the most important tasks of an entrepreneur is to acquire new customers. Whether it's a new service or a product, without a large enough user base a brand cannot start it's journey towards profitable growth. As brand consultants, we have observed startups can be broadly classified into two types - those who want to create entirely new categories and firms who want a share of the existing pie. And interestingly the key tasks related to customer acquisition differs, depending on whether the start up is a Pioneer vs. a Challenger brand.
Challenger brands are essentially attempting to gain a share of an existing market. Their task is to stand out from the crowd, show customers how they are relevant and gain share from existing players. Pioneer brands on the other hand are attempting to meet a latent or unmet consumer need. Their challenge is to create awareness about an entirely new category and convince people why they should change their existing habits.
Hence an entrepreneur should determine his or her customer acquisition strategy based on whether the new launch is a Challenger or a Pioneer brand category.
Challenger Brand Dynamics:
All brand positioning engagements begin with understanding the startups offering, mapping the consumer's need states and identifying available positioning platforms. Challenger brand discussions focus on ensuring we identify the key drivers of choice of an existing category and position the Start Up in the most attractive quadrant of the positioning map. Once a differentiated positioning is finalized, we work on a customer acquisition strategy with 3 critical elements:
1. Creating Brand Awareness : Using traditional or new age methods of informing the target audience of what the brand has to offer (rational and emotional benefits)
2. Building Differentiation : Highlighting how the brand is superior to competition and meets the customer's needs better
3. Communicating triggers for trial : As a challenger brand - the marketing team's role is to give the consumer a reason to switch from their existing brand.
Example : Amazon challenges Flipkart :
When Amazon entered India, they faced a well entrenched pioneer brand in Flipkart. To dislodge the incumbent they spend heavily on advertising (ATL spends are unique to India in the Amazon world), offered differentiated services (delivery and range related), invested in a state of the art back end system. Plus the firm invested heavily on discounts and other triggers for trial. The company had to tailor their entry strategy - keeping in mind the existing competitive context and need to create differentiation vis-a-vis the established leader
Pioneer Brand Dynamics:
Pioneering Start Ups are trying to create a new category. In order to position them effectively, we try to identify a critical consumer insight that will allow us to link the consumer needs to the brand offering. The marketing challenge for a pioneer brand is simple - to acquire new customers. However the task per se is extremely difficult. This is true irrespective of whether the new launch is a Fin-Tech Service or Household Composting Solution. Because changing an existing mind-set or a way of life is a difficult task.
We suggest the customer acquisition plan for Pioneer Brands include the following elements:
1. Category and Brand Promise Awareness : Create awareness of the category and embed the brand - this ensures the brand is synonymous with the category enabling faster customer acquisition
2. Build Relevance : Give a clear 'reason why' the offering meets consumer's latent needs and helps make their life better
3. Create Credibility : Offer reasons to believe why the new offering is relevant and why the brand should be trusted
4. Early Adopter Engagement : Early adopters are the trailblazers. By incorporating their feedback and promoting their experiences / recommendation - the brand can build its momentum faster.
Example: Moneyview App helps millions achieve Financial Fitness
Moneyview is India's leading Money Management App launched by its founders to help people gain control over the finances. At time of launch, this pioneer brand had almost no App based competition in the market. However a quick overview of the existing money management habits indicated consumers were either managing with status quo (no control) or using traditional models for money management excel sheets / books / envelope systems. There was no explicit need for such an app.
The founders targeted customer acquisition by getting people to change their existing habits and mind-sets. They focused on consumer needs and designed product upgrades based on user feedback. An aggressive digital campaign supported by extensive PR and content marketing, helped them gain mind share. Over a period of two years, the brand was able to build awareness of their brand promise and gain desired downloads.
Customer acquisition strategy needs to be tailored to address the business needs. While working on Challenger brands - the primary role of marketing strategy is to position the brand in the best possible manner within the competitive context. Whereas for Pioneer brands the challenge is effectively communicating the key triggers for habit change. In both cases, once the strategy is in place, simple but effective communication needs to be conducted to get the message across to the target audience.