Do you know what sets your business apart from your competition? Here’s why it’s important to define your business’s competitive advantage.
Every business owner must be able to answer one very basic question, “Why should a prospective customer buy my service rather than a competitor’s?” If the owner cannot answer this question, he or she should probably cut his or her losses and seek alternative employment. Fortunately, this isn’t a complex question. At its core, there are only two possible answers; either the product or service is being offered at a lower price or the offering must be differentiated from the competition’s.
Very small businesses can sometimes offer lower prices than their larger competitors because they have much lower overhead. For example, consider a residential cleaning service run by two friends out of their homes. The two friends are the only employees. There is little to no overhead. Such an operation can offer its services at prices below those that a company such as Merry Maids would have to charge, because Merry Maids does have significant overhead. However, this strategy is inherently limiting. If the two friends were to attempt to significantly grow their abhishek enterprise, they would discover that they would need to add overhead similar to their larger competitors.
Most small businesses that want to grow beyond a few employees will find that a low cost strategy is difficult to pursue successfully. Therefore, such enterprises are left with the need to differentiate their products or services–give their customers a reason to buy that isn’t based on price.
Assuming that the graphics/service package can be targeted to uniquely meet the needs of a sufficiently sized group, the customers in each segment must be externally identifiable. Marketers need to know how to reach the specific segments. Should the company advertise in Sports Illustrated or Cosmopolitan? Alternatively, the members of a particular segment may be self-identifying.
The question is, what do you do better than your competitors?
It goes without saying that whatever you do;
– it must be important to the customer
– it must be feasible
– it mustn’t be easily copied
– it must be consistently communicated in the customer’s own language
In marketing there’s always more than one angle when it comes to approaching a problem or an opportunity. In this article I’ll look at differentiation and establishing competitive advantage from the product offering perspective. By product, I mean, not just physical goods, but also services and Companies
A competitive advantage can come from several different places, such as:
– superior quality of product/service
– brand image and reputation
– innovative culture
– superior customer relationships
– offering only to a niche market
Let me answer his question more specifically: How do you build a customer-driven (rather than competitor-driven) statement of your advantage? Use the following three steps.
Define your guaranteed home-run customer
There are customers out there for whom the difference you make is so significant that all other options fade to nothing. Do you know who that customer is? If not, get clear on that before you move to the next step.
Describe the problem you fix perfectly for this ideal customer
You are often the ideal vendor not just because of who they are, but because of their current problems and challenges. Are you best when they are growing fast, shrinking, reorganizing, going international? You need to understand exactly what problem you solve.
Declare your market
Once, while driving on a country road, I saw a dusty old building with a sign out front: “The Stradivarius of Duck Calls.” It didn’t say “animal calls,” “water-fowl calls” or even “bird calls.” Once you know whose Stradivarius you are, be ready to declare it loudly and proudly.
One final note: Often, when I challenge companies to do this exercise, they reply, “it depends.”