The Challenger Brand Playbook

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The Challenger Brand Playbook

Conventional wisdom says it's impossible. In saturated categories, the giants have already carved up the market. Why would anyone try to launch a new running shoe when Nike exists? Or another soda when there’s Coca-Cola? Let alone a makeup line with the hundreds already out there.

But that's exactly what On Running, Rhode and Poppi have done, and it’s working.

On achieved a $6.6 billion valuation despite having only 23% brand awareness compared to Nike's 96%. Rhode sold for $1 billion after just four years. Poppi is capturing market share while Coca-Cola and Pepsi watch their metrics decline.

New data from Tracksuit reveals how these challenger brands succeeded in supposedly impossible markets. The answer isn't what you’d expect.

Successful challenger brands don't beat incumbents at their own game. They don't mirror their positioning and try to steal the same customers. Instead, they rise to meet changing consumer demand, carve out underserved niches within growing categories and reflect existing identities rather than promising transformation.

Here's how they do it.

Rising With the Professional Runner Movement

Marathon participation has exploded. In Australia alone, participation jumped from around 5,000 runners in 2004 to over 50,000 in 2024.

This cultural shift created demand for serious running gear beyond the mass athletic appeal of Nike. While they dominated the broader "athletic lifestyle" market, a new segment of dedicated runners wanted something different.

But On isn't competing alone in this professional running space. Hoka identified the same cultural shift and built their brand around durability and support for serious athletes.

The difference is in the positioning details.

While Hoka targets runners with messages about reliability and long-lasting performance, On carved out the comfort niche. Their brand perceptions reflect this, On’s being "comfort", "active", "cozy" versus Hoka's "supportive", "durable", "reliable".

It's a subtle but crucial distinction. On understood that runners don't want to be told they need to suffer for performance. They want comfort that enables their passion. Instead of competing for Nike's broad athletic market, On identified an emerging segment and claimed the most appealing positioning within it.

Owning Beauty Trends

Beauty is experiencing its own cultural shift. The era of airbrushed perfection has given way to authentic representation. Consumers, especially younger ones, are rejecting unrealistic beauty standards in favour of brands that celebrate real skin and individual style.

But Rhode isn't the only celebrity-founded beauty brand trying to capture this shift. The comparison with Kylie Kardashian’s Kylie Cosmetics reveals why brand positioning matters more than famous founders.

Rhode's brand perceptions: "excellent", "innovative", "clean".

Kylie Cosmetics: "overpriced", "low quality", "overrated".

Both brands have celebrity endorsement built in (literally in Kylie's name). But Rhode focused on trend-setting and authenticity while Kylie relied heavily on celebrity status without delivering on the deeper promise of quality and innovation.

There’s even greater contrast with traditional incumbents. Where Maybelline owns "affordable", "basic", "everyday" positioning that appeals to mass markets, Rhode claims "trendy", "stylish", "youthful" territory that resonates with consumers who see themselves as early adopters rather than mainstream buyers.

Rhode succeeds because they mirror their customers' current identity as trend-conscious, authenticity-seeking beauty consumers rather than promising transformation into someone different.

Rather than competing on traditional beauty metrics like premium positioning, Rhode completely owns the trendy space, reflecting who their customers already believe themselves to be.

Capturing the Health Shift

Consumer behaviour is shifting towards health-consciousness, creating demand for entirely new beverage categories while traditional soft drinks decline.

Poppi's consideration grew 7% while Coca-Cola declined 3%, Pepsi dropped 9% and Dr Pepper fell 6%. It's not just about poppi's growth, it's about the entire category shift creating opportunities for multiple challenger brands.

Poppi leads this movement with innovation and health messaging that directly contrasts with Coke's "classic", "timeless", "original" perceptions. Where incumbent soft drinks represent tradition and familiarity, poppi represents progress and conscious consumption.

But poppi isn't alone in this space. Olipop is growing alongside them, targeting the same health-conscious consumers with remarkably similar messaging.

Sometimes breakthrough opportunities don’t come from fighting existing players, but from recognising when cultural shifts create entirely new demand that multiple brands can capture.

The Strategic Advantage

This approach works because it creates multiple competitive advantages that traditional head-to-head competition can't match.

Lower competition in precisely defined niches means your marketing budget works harder. Instead of fighting for attention in crowded spaces, you're speaking directly to underserved audiences who are actively seeking what you offer.

Higher emotional connection through identity alignment creates switching costs that go beyond rational product comparisons. When customers see your brand as a reflection of who they are, they don't just prefer your products, they defend your brand as ambassadors.

Sustainable differentiation that's harder to copy emerges from authentic positioning rather than feature sets. Competitors can replicate your product benefits, but they can't easily replicate years of consistent cultural resonance.

These advantages compound over time. As your category grows, your niche share grows with it. On benefits as more people become serious runners. Rhode wins as authenticity becomes more important in beauty. Poppi grows as health-consciousness expands.

The Courage to Be Specific

The most successful challenger brands follow a clear but potentially counterintuitive framework.

• Spot the shift: Monitor cultural trends and behavioural changes in your category. Look for emerging consumer needs that incumbents are missing or dismissing. The marathon boom, the authenticity movement, the health-consciousness trend. These weren't sudden changes. They were gradual shifts that created new demand.

• Claim your corner: Map existing positions to find underserved niches within growing segments. Don't just identify the cultural shift, identify the specific positioning within that shift that you can own completely. Comfort within professional running. Trendy within authentic beauty. Low sugar within healthy drinks. Demographic filtering and targeting can be useful to unearth these ‘micro’ trends and underserved niches before they become macro. Gen Z and Millennial groups were strongly overrepresented in non-alc drinks before the rest of the population caught on.

• Mirror the market: Build positioning around existing consumer identities, not aspirational transformation. Reflect who your customers already believe themselves to be rather than who they think they should become. Comfort-seeking runners, not performance athletes. Trend-conscious consumers, not transformation seekers. Health-minded drinkers, not diet extremists. But remember, insight is two-way, continuous and happening in real time. Staying close to the customer is a central principle in how all these brands grew.

The paradox of challenger brand success is that narrower focus creates broader opportunities. In attention-scarce markets, being essential to some beats being forgettable to many.

Your next move isn't to fight the giants on their terms. It's to find the cultural shift they're missing, claim the most appealing corner within it and mirror the identity of consumers who are ready for something different.

You don't need to beat Nike. You just need to own your slice of the market better than anyone else. Because when you do that well, you don't just win market share, you win hearts. In crowded markets, that's really the only advantage that matters.

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