Eating The Big Fish summary

When you were in school, did you ever compete with your peers over grades or in gym class? If you did, this competitive spirit probably led to you coming face-to-face with someone who always seemed to have the edge over you – and the world of business poses a similar situation.

In business, these powerful rivals are called brand leaders. They are established firms with clear competitive advantages over the brands below them, which are known as challenger brands. As a result, leaders naturally enjoy a higher rate of profit than challengers.

For instance, data collected in 2007 by the Profit Impact of Market Strategy, or PIMS, found that the return of an investment placed by a brand leader in Europe is 40 percent, while the rate for the second-ranked brand is just 26 percent.

In the United States, firms put up comparable numbers, with the leader getting a 32-percent return on their investment and the number two brand bringing in an 18-percent return.

Simply put, brand leaders get more bang for their buck. This higher level of profit also means that they invest more and, therefore, make even more profit. They can even invest in long-term projects like researching ways to increase their competitive edge down the line.

But that doesn’t mean that brands in the second position or lower are entirely outgunned – these companies simply need to think differently.

While it’s great to be the best brand on the market, it’s still pretty good to be number two, three or four. Just take the American car rental service, Avis. The company knew it wasn't the leader in its industry; it was clear that their fierce competitor, Hertz, held that title.

In fact, Avis was closer to the rear of the pack. But with an incredible advertising strategy, they managed to climb into second position and close Hertz’s considerable competitive advantage.

And that’s just one example of how challenger brands can strut their stuff. While they might need to work harder and do a bit more to keep up, they can make great leaps through creative approaches.

But before you learn more about the mind-set challenger brands should adopt, let’s take a closer look at the hurdles they face in today’s market.