Your competitive advantage is what helps you to stand you out from the pack. It is what differentiates you from everyone else whose services or products are similar to yours. It is the reason why people choose to do business with you rather than your competitors. It is what makes you unique.
Why is it important Without some distinctive advantage you are unlikely to remain in business for very long. Over time your goals, strategic objectives and action plans will change but your competitive advantage is something that will grow stronger and stand the test of time.
Being able to articulate how you differ from everyone else to your prospective customers will give them a compelling reason to use your service / products. The more reasons you can give customers to do business with you (as opposed to your competitor) the more likely you are to make more sales and hence profit.
Many small businesses try to differentiate themselves by saying that they offer good customer service or quality products or service. You are not going to convince customers by telling them this as most would expect this as standard and these have different meanings to customers. When talking about quality or outstanding service – define it – what does it mean, look like?
What can you do to gain competitive advantage?
Being the cheapest and most cost efficient
I stand out because my T shirts are the cheapest on the market. I am able to produce high volumes of T shirts cheaply because I am able to buy in bulk at discount prices. By exercising a tight control in all areas of the business and in production I am able to keep my cost down and sell my T shirts cheaply.
Not many small businesses fall into this category because it means competing against companies who are bigger and have the economies of scale to work this way
Focus on a niche market
Rugged Ways is a shop in Skipton that sells shoes. Not any shoes but shoes for active people sporty people. And not for any active outdoor people but specifically for walkers. This is a specialist shop that caters for the needs of walkers. If you are serious walker you head here for all things ‘walking’. It focuses and targets a specific market – walkers.
The market is over saturated with coaches. Choosing a niche will help you to set yourself apart from the rest. For example if you are a business coach you may choose to work people who are thinking of starting up a business, people who have started a business, owners who are looking to grow their businesses, business with have more than 15 employees, businesses within a specific sector for example the creative industry …
Differentiation: Creating a product or service that is unique and offers special benefits that no one else can give your customers.
My local hardware store has been going for over 70 years. If you are looking for good quality tools, specialist advice, this is the shop that you will head to and not the big DIY store down the road where you will be served by the spotty teenager who does not know the difference between a smoothing plane and a block plane.
What they offer is specialist service and advice, after sales delivery and back up and builds genuine relationships with their customers – and you don’t get that at the big DIY store down the road!
If you cannot differentiate yourself, your potential customers will compare your offering with others purely on price and there will be no outstanding reason for them to consider buying from you. Businesses that are able to differentiate themselves are usually able to charge more for their services and products because their customers can see the value in doing business with them.
Focus and Differentiation are the most common small business strategies and when combined together will help you to build your competitive advantage.
Which of the above strategy is best suited to your business? How do you stand out from the crowd?