A market challenger is a company that is working hard to earn a higher share of a particular consumer market, and is posing something of a threat to the businesses which are the front runners in the industry. While the current share of the challenger is less than that of the market leaders who current account for the majority of the sales made in that market, an up-and-coming business will intentionally compete with and show signs of capturing more clients from those leaders over a period of time. Given the right set of circumstances, a market challenger can eventually become a market leader in its own right.
One of the easiest ways to understand the concept of a market challenger is to consider the launch of a new brand of soda. With the market already dominated by a handful of industry leaders, the new brand will pursue an aggressive marketing strategy to reach consumers and entice them to give the product a try. Assuming that the strategy does reach a significant number of consumers and they find the soda to compare favorably with older established brands, the market challenger will, over several years, build market share that is captured from those industry leaders. Given enough time, the sales of the challenger may come to rival those of the traditional leaders, allowing that challenger to be recognized as a leader within the beverage industry.
The strategies used by a market challenger to build rapport with consumers will vary, depending on the nature of the competition within the marketplace and the goals of that company. In some cases, the basis for the competition may be a price war, with the challenger touting a product of similar quality but available for a lower price, a move that may cause leaders to offer some price incentives of their own. At other times, the focus may be on presenting the newer products as being superior to other more established products on the basis of taste, ease of use, or some other defined criteria. The market challenger may even compete on the basis of being an operation that is more environmentally friendly than the competition.
Typically, a market challenger will demonstrate some potential for capturing a significant amount of market share. That potential is often made manifest by appeal to certain sectors or groups within the broader consumer market, the use of modern technology to compete with the established and possibly more traditional leaders in the market, and the fact that the marketing efforts of the business are in fact leading to a steady increase in sales volume. While there is no magic formula that defines every aspect of being a market challenger, it is not unusual for any company that is new on the scene and is obviously gaining new customers to be perceived as a viable threat to the old regime.