A market challenger has a smaller piece of its target market than the market leader but is in a position to compete and increase market share. The market leader may have more resources available and be in a stronger position to acquire and retain customers so the challenger must be judicious in choosing the best way to grow. Some alternatives are risker than others and this should always be considered when taking on the market leader. The challenger can compete on price, differentiation, superior customer service or by introducing new products and service offerings. Competing on price or new products tends to be riskier than differentiation or superior customer service. At any rate – in a finite geographical market customers must be gained through direct competition. Following are ways that a challenger can increase market share:
- Price – Offering a lower price than the market leader can be an effective way to break into a market. However care must be taken in that price shoppers tend to remain price shoppers. Loss leaders can easily become repair orders that lose money. The most effective way to gain market share by competing on price is to operate from a lower cost position.
- Differentiation – Competing with the market leader through unique product and service offerings can be a successful approach to increasing market share. Providing services that competitors do not or providing them in a way competitors don’t will offer distinct value to customers that they won’t find elsewhere.
- Customer Service – Premium customer service will make a challenger very competitive. Often market leaders who’ve garnered a large market share tend to lose their personal touch and relationships with customers diminish. This is an area in which a challenger can compete and gain market share.
- New Products or Services – Succeeding at being the first to market with a new product or service effectively puts the challenger in the position of leader. Providing the offering opens the door to customer acquisition and increased market share.