Why might challenger brands appeal to our human nature? Matthew Willcox, Executive Director, Institute of Decision Making at FCB is our guest author on The Challenger Project this month and shares the psychology behind why this might be.
1. Humans need reference points
Everything is relative, and never more so then when it comes to us reaching decisions. And it is not just a rational comparison thing. In a phenomenon behavioral scientists call anchoring, we are more comfortable in letting our intuitions or our autopilot guide us when there is something to “anchor” our decision on. The remarkable thing is that the anchor doesn’t even have to be relevant.
In an experiment from 2004 by Ariely, Loewenstein and Prelec, the researchers anchored participants with the last two digits of their social security number. When they where then asked to bid on an assortment of goods, those with the higher numbers (80-99) bid an average of $56 for one item; those with numbers between 1 and 20 bid an average of $16 for the same item.
Anchoring is a great example of the economic effect of reference points. I would suggest that abolishing reference prices in a well-intentioned move to provide greater clarity in their pricing structures was one of the major contributors to JCP’s staggering decline last year.
Reference points extends beyond pricing, and one plausible hypothesis would be, that by their nature, challengers invite, even encourage comparison, whether it is to a convention, a philosophy or out and out with a brand.
Apple did this very effectively with Mac vs PC, and had the same weapon used against them to equal effect by Samsung. Contrary to conventional marketing thinking, comparing doesn’t dilute who you are – in terms of our autopilot, it makes it clearer.
Brand gurus often talk about putting a stake in the ground. Behavioural sciences would suggest that lassoing an existing stake might be the best approach.
2. We have an instinctive reaction to unfairness
One of the things challenger brands often do is remind us that there is a struggle, and that – even though they may love and thrive in the situation – they are underdogs. However, what might be important here is not what they say about themselves, but what this implies about the dominant brands. The implication is that these bigger brands have it easier, have an advantage.
An original classic challenger approach, Avis’s “We’re #2, so we try harder” didn’t just say that Avis, the challenger, tried harder than Hertz, the dominant brand. It also said that Hertz was in a privileged position where they didn’t have to try so hard. So an idea to consider is that a challenger approach can create a sense of unfairness about a dominant brand’s advantage.
This is interesting because of our gut reaction to unfairness. Actually, more than our gut -- scenarios of unfairness lead to activity in the anterior insula, an area commonly associated with autonomic or visceral arousal, but also with negative emotion, anger and disgust, pain and distress.
This leads to something called Inequity Aversion, a term coined by Ernst Fehr (unfortunately pronounced “fear” and not “fair”) and Klaus Schmidt – which is pretty much what it says it is. A sense of inequity pushes us to action. That feeling of anger and disgust – often disproportionate to the infraction from a rational perspective, is so unsettling, and so nagging for us to resolve it, that it does a very rare thing. It overcomes our procrastination and inertia and makes us do something.
In 2011 hundreds of thousands of people in the US changed their banks -- something that people only do a few times in their lives, and then normally because of a major life event like moving or marriage. They did this because banks were felt to be gouging an unfair level of profit by charging a $5 a month debit card fee. Netflix had a similar fate – 800,000 subscribers leaving this once much-loved brand over a three month period, because the introduction of pricing that was seen as unfair.
These cases show a company’s own actions can create a sense of unfairness with devastating consequences for their business. So it isn’t too far fetched to suggest that a challenger, either by reveling in a disadvantage or by pointing out an advantage or privilege of a dominant brand, could stir up and benefit from a little Inequity Aversion…
3. We identify with underdogs more than we do with top dogs
While underdog doesn’t always mean challenger, and challenger doesn’t always mean underdog, there are some commonalities. And these also give us some clues as to the attraction of challenger brands.
Neeru Paharia, now a professor at Georgetown and part of the Institute for Consumer Research there co-authored a thought provoking paper based on her research into the effect of underdog brand biographies on people’s behavior. Paharia and her colleagues found that when brands emphasized their underdog nature (starting with disadvantages but overcoming them with determination) that people were drawn to them.
Although this may not be surprising, Paharia also looked at some of the reasons for this, and some of the conditions that made the underdog factor more or less likely to have an effect – and these seem strong tied into aspects of identity.
First, one of their findings was that the effect was greater for consumers who strongly self-identify as underdogs (and that isn’t just a small minority – most of us have a sense that we are underdogs in some way or another).
Second, they saw the effect was stronger when consumers were purchasing for themselves versus for others-- a strong implicit suggestions that this is about identity.
And third, they found it was stronger in cultures in which underdog narratives are part of the national identity, which suggests that challenger brands might work differently in the US than in some Asian markets.
A conclusion might be that a challenger narrative is less about the brand telling the story, and more about the consumer experiencing it. Perhaps challenger brands should focus less on proving themselves to be challengers, and more on connecting with and activating the challenger within all of us.
Matthew Willcox is Author of "The Business of Choice" and EVP, Global Planning Director Executive Director, Institute of Decision Making at FCB.