This report is part of Rival Spark, our collaboration with Attest and the marketing faculty at Imperial College to understand what makes successful challenger brands. You can see all our Spark reports here with embedded audio and commentary from industry experts.
The Rise of the Pufferfish Challenger
Traditionally, marketing has enforced a speed limit on how fast and where challenger brands can grow. Smaller brands were expected to ‘act small’, blocked from certain ways to market, distribute or advertise - while larger brands enjoyed greater scale, budgets and media channels. However, greater access to ‘traditional’ media channels, changing supply chains and increased social amplification have broken the classic relationship between company size and operational scale. With the right combination of tactics, smaller challengers are ‘puffing up’ to deliver outsize impact in consumer’s minds - appearing more established than they may actually be in how they advertise, where they sell and how consumers advocate for them.
One of the longstanding benefits of advertising is ‘signal effects’: spending money and effort on advertisements signals to consumers the quality, size, and creativity of the brand. For example, an expensive television ad campaign tells consumers the brand is confident in what it sells. Research has shown that the signaling benefits of advertisement lead to brands being perceived as more highly capable and more committed to their work (Dahlen, M. et al., 2018). Indirectly, signal effects can amplify positive word of mouth, with advertisers active in categories with greater positive discussion reinforcing a sense of quality with their advertising activity (Joshi & Musalem, 2021). Pufferfish tap into these signal effects by being strategic with their distribution and platform tactics.
This trend hasn’t emerged from the blue, but is instead a natural progression of how the long-tail focused and socially incubated brands that are most often ‘Pufferfish challengers’ are evolving. As marketing services have progressed from empowering smaller brands to establish themselves and exist online (e.g. Shopify) to helping them grow and utilize predominantly digital channels (e.g. the Social advertising ecosystem) - the natural next step is to push further and break into the ‘big brand’ toolkit sooner. As this occurs, challenger brands which have been limited to digital and social channels or specific distribution methods are able to leap frog the traditional steps to larger growth - experimenting with traditional media channels or distribution at scale long before they would previously feel appropriate and reaching more homes, faster.
New Media Toolkits for Pufferfish
Challengers have often found themselves the victim of what Andrew Ehrenberg calls Double Jeopardy: lower market share brands have both fewer buyers and lower brand loyalty, creating twin barriers for challenger brands to overcome vs. incumbents. Our Spark research data also show that reviews, promotion, and familiarity are the primary drivers of trial in a new sector - factors only compounded for products with established consumer purchase behavior. Promotion- and discounting-based user growth tactics rely on pricing strategies for acquisition, eroding margin and ultimately lowering profit. Advertising for net-new customers and improving profitability of existing users is a stronger approach for market share gain. Thus, the task at hand for challenger brands is to quickly drive scale while building trust and familiarity.
Historically, both scale and trust have been unlocked by larger media budgets. In-store advertising, television, and print are considered more trustworthy channels by many consumers vs. more “challenger-friendly” channels such as radio, digital audio and direct mail - and until recently, access to those “trustworthy” channels was expensive and limited.
However, this is rapidly changing. TV buying is increasingly democratised and the lines between broadcast and digital are blurring - now, almost any brand can purchase OTT or VOD inventory with many major TV and streaming providers without the historic gatekeepers of ad agencies and upfront, negotiated media buys. More addressable options like Sky AdSmart in the UK will only continue this trend. In-store placements are going digital and can in some cases even be bought programmatically with some partners in the United States or directly from retailers via their own exchanges.
This move to “traditional” channels doesn’t just allow ‘Pufferfish’ to grow but it anchors brands in a new consideration set in the consumer’s mind, beyond the battleground of search, social and digital advertising.
Additionally, it allows challenger brands to reach and connect with older audiences, as younger segments are most likely to trust the standard challenger growth channels of Social and Digital video vs. an older audience. For example, in the UK 18-30s were more likely to rank social advertising as more trustworthy than broadcast TV (avg. position of 4.4 vs. 5), whereas 50+ were significantly the opposite. A lack of trust in digital audio, even amongst younger audiences relative to digital video and social may stem from a lack of established brands’ adopting the channel into their media mix.
The Power to Supercharge Place: New Distribution Options for Pufferfish
Beyond media innovation, distribution opportunities created during the pandemic offer challengers an opportunity to disrupt the linear relationship between product availability and scale. A growth in online grocery shopping and delivery, as well as emerging rapid delivery services offers smaller brands larger distribution and prominence in digital retail environments. Rapid delivery services such as Gorillas, Zapp, GetIr and others are in a stage of market consolidation as they scale their user bases in many countries - creating an opportunity for pufferfish to become more prominent in app through potential partnerships, as users trial different services. Additionally, the ability to disrupt existing purchase behavior through integration between online delivery and advertising can help a pufferfish move quickly from advertising exposure to product trial.
Greater Advocacy at Scale: Pufferfish in Social
Beyond creating a user base faster through new delivery avenues, Pufferfish also have increased social advertising opportunities available to them. While social ads have long been the mainstay of challenger marketing, high reach on platforms such as TikTok and greater in app purchase opportunities have created the ability to quickly create, grow and monetize a fan base. The advocacy many consumers need when considering new products has been found by tapping into TikTok users’ interests in new products and brands. From Little Moons Mochi to the Pink Stuff, TikTok’s active community and, currently, high organic reach have created an environment where challenger brands that have captured user’s attention can benefit from high product recommendation and trial.
In our research, US & UK consumers reported TikTok users delivering a level of product recommendation or directly influencing product purchase at a level similar to Facebook, Instagram and YouTube - all of which have been around for significantly longer. As TikTok develops its commercial proposition further, the distance between TikTok sensation and commercial impact will decrease.
For many challenger brands, influencers have been an integral part of growing a brand socially, using paid relationships to gain credibility and prominence quickly amongst an engaged audience. The maturation of the influencer market, with greater tools to evaluate, engage and quantify influencer’s value is another asset to pufferfish challengers looking to quickly grow. However, relative to other channels, influencer paid disclosure regulation and consumer trust looks to present a short term challenge to effectively using influencer marketing.
Our research shows that US & UK audiences still largely trust some recommendations from influencers, but a greater percentage trust those products which are presented as personal and unpaid vs. paid promotion. As advertising standards become increasingly stringent on disclosing paid relationships, finding ways to authentically engage influencers with brands and products becomes more important. Demographically, engagement with social influencers also lacks scale with older audiences, as only 37% of 50+ say they follow influencers in social media vs. a much more engaged and trusting under 30 audience.
Pufferfish 101: Planning to Puff
For brands looking to leverage the Pufferfish opportunity, there are five key principles to consider in how you plan, budget and execute your marketing.
1.) Pay to Puff Through Experimental Budgeting
How you budget is the key enabler to foster a pufferfish brand. Holding back a portion of your budget every quarter to expand into unexpected channels, experiment with new distributors or use existing channels in new ways is the only way to find growth. This budget shouldn’t be treated as superfluous or ineffective, but instead the engine for how you gain insight about the market. Spending money to establish the brand on affordable TV options, experimenting with OOH and print or creating a new content stream on TikTok may feel like a risk. However, the value of these experiments isn’t just immediate business impact, but long term insight on how your brand can differentiate from the market and change how it is perceived - creating secondary value.
2.) Seek out Underpriced Trust & Attention
Your marketing communications plan needs to be focused on more than reach. While scaling a customer base is a core element of any challenger’s growth strategy, media channels should be considered holistically - in how they deliver attention and foster trust. Building relevance and credibility at scale, not just broad brush awareness, can help a pufferfish expand beyond its actual size. Channel innovation is constantly creating new ways to find cost effective trust and attention - as long as you consider the wide range of channels available to you and budget in a way that makes them actionable to experiment in.
3.) Plan to Place in New Ways
Look to leverage online shopping and delivery in new ways to disrupt the traditional distribution strengths of incumbents in the market. As delivery services become faster and rapid delivery is offered in new areas, brands can provide a product before the regular shopping trip can occur, trusted in-store media and previous experience pushes consumers towards established competitors. Looking at how to leverage this developing space can help you puff up your physical presence - with options ranging from digital retail advertising through to partnerships or potential exclusivity with emerging delivery brands - blocking competitors from this new opportunity. Integration between advertising and delivery partner can close the loop to trial - pushing users with direct CTAs or prompts to immediately get a new product experience in the home.
4.) Incubate in Social Community
The potential of TikTok to ignite fan interest around brands is an attractive one, but it requires making content that is relevant and authentic to the platform. Don’t assume that advertising on TikTok is the same as succeeding on TikTok. Consider who your audience would be on the platform and what they value and talk about. Use relevant communities as inspiration for how to approach TikTok and loosen limits on how content can be created. Adopting a TikTok specific brand voice or content strategy can help to draw in support from communities who can puff up the brand. Don’t be afraid for this content to feel different than other channels, as popular TikTok brands from Duolingo, Heinz, Ryanair and others show - an empowered content team can go where consumers want to take you.
5.) Foster Influencer Authenticity
The potential of influencers to help pufferfish is real and maturing, but brands need to consider a growing trust gap between paid and organic product content. As advertising disclosure regulations are more stringently enforced and observed, making any #sponsored content feel authentic despite the paid relationship is key. Considering a range of influencers at different scales, uncovering influencers with an existing link or relationship with the product and thinking long term about influencer relationships are all key elements to using influencer support to scale faster.
Dahlen, M., Rosengren, S., & Karsberg, J. (2018). The effects of signaling monetary and creative effort in ads: Advertising effort can go a long way influencing B2B clients, employees, and investors. Journal of Advertising Research, 58(4), 433-442.
This article extends the literature on the “signal effects of advertising.” Spending money and effort on advertisements signals to consumers the quality, size, and creativity of the brand. For example, an expensive television advertisement campaign tells consumers that the brand is confident in what it sells. These researchers conducted a series of experiments to show that the signalling benefits of advertising extend to B2B companies and recruiters as well. Clients and potential employees saw brands that advertise more as being highly capable and committed to their work. Advertising also impressed investors and other stakeholders.
Joshi, Y. V., & Musalem, A. (2021). When consumers learn, money burns: Signaling quality via advertising with observational learning and word of mouth. Marketing Science, 40(1), 168-188.
In further work in this area, Joshi and Musalem (2021) recently studied how the signal effects of advertising depend on consumers’ word-of-mouth. When consumers talk about products and services at high volume, brands should generally increase advertising spend to credibly signal quality. However, consumers do not share positive and negative word-of-mouth equally. In some settings, consumers tend to speak up when they have something to complain about, whereas in other situations they tend to share only when they have had positive experiences. The researchers found that in settings of positive word-of-mouth, brands should advertise more as the general buzz in the category becomes more positive. However, when word-of-mouth is mostly complaints, only high-quality brands should advertise more.