All businesses, large or small, need a competitive advantage to differentiate themselves from competitors. In an aggressive business world, especially with today's economic situation, all the advantages you have can be utilized to put your business at the top of the industry. To gain a competitive advantage, you need planning, extensive research, and investment in marketing.
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Part 1 of 3: Evaluating Your Business
Step 1. Know what "competitive advantage" means
Competitive advantage is a factor that differentiates your business from other businesses, and makes customers prefer your products over competitors. Without a competitive advantage, your business has no unique method of attracting customers.
- Competitive advantage is how you create value that competitors can't for customers. These values can be lower costs, faster service, better customer service, location, quality, and many other factors.
- There are several things involved in creating a competitive advantage, namely analyzing the strengths of your business and the strengths of your competitors, and learning how to take advantage of these strength factors.
Step 2. Assess the unique strengths of your business
Assessing business strengths allows you to know which areas can be developed to create a competitive advantage. Ask yourself, “Why do customers buy from my company?” The answers to these questions will help you figure out what value you offer them.
- For example, if you own a Chinese food restaurant, all factors such as the quality of the food, the location, or perhaps the speed of delivery service contribute to the customer's decision to choose you over the competition.
- Don't be afraid to ask the customer directly. You can compose a survey for them to fill out or approach them in person, with the aim of finding out why they chose you.
- For example, if many customers mention your location, you can work on other aspects to create a bigger edge.
Step 3. Look at your competitors
Competitive advantage means that you have to offer some things that your competitors can't. Therefore, you must know what your competitors do well, and what they don't. Think about competitors' products, services, prices, locations, and marketing. Then, make a list of the reasons you think customers will choose a competitor's business.
- Compare the list with your list of advantages. What are your strengths that your competitors don't have? What competitive strengths do you not have? The areas of strength that you have are areas that you should focus on developing.
- Remember not to match your competitors as much as possible. For example, if your competitor has a recipe that many customers like, copying theirs will not add to your competitive advantage. Instead of trying to emulate your competitors' advantages, leverage yours to create unique strengths that cannot be imitated.
Step 4. Take advantage of the services of a company that specializes in providing business information
Let's take the example of a company that is widely used abroad, namely Cortera, which conducts research, compiles, and analyzes competition in the target market. Such companies have extensive databases so they can quickly access the information you need. The more information you have, the easier it will be for you to decide what will work and what won't.
- Detailed knowledge of customers is as important as knowledge of competitors. Having deep insights into your customers allows you to maximize revenue potential, increase customer retention, and increase leads.
- You can use a combination of different tools and methods to gauge customer wants and your position in the market and competitor's position. Along with traditional corporate sources of information, consider social media analytics tools that allow for extracting customer desires at scale.
Part 2 of 3: Creating Competitive Advantage
Step 1. Review your core strengths
Once you have identified your core strength areas, you can augment them by using several marketing strategies to build a competitive advantage, or to create new areas of strength.
For example, your main strength is product quality. You can add to this strength by focusing more on fantastic quality, as well as striving to deliver products faster at lower prices
Step 2. Reduce costs
Cost reduction is one strategy that businesses can take to gain a competitive advantage, or to increase advantage. Most markets have price-sensitive customers, so the ability to offer a product or service at a lower price is a particular way of creating value for customers. For example, in America Wal-Mart is known to have a competitive advantage because of its ability to provide low prices.
- Evaluate your entire production process. This includes everything from buying supplies and how workers produce, to how to sell products
- Consider investing in technology that reduces costs. For example, if you own a restaurant business, purchasing energy efficient equipment can reduce operating costs. If your business has a better credit rating than your competitors, you can finance the purchase at a lower price.
- Evaluate how your workers produce to make sure they are not wasting resources and that they are producing as much as possible.
Step 3. Focus on service
In certain markets, service may be a differentiating factor between competitors. If your business already has strengths in services, consider increasing your focus in this area.
Hiring better staff, raising training standards, managing staff more closely, offering rewards and incentives for excellent service, and offering more comfortable operating hours can all help breed excellence. Satisfactory service is an important culture to create. If your service excellence is based on a few simple factors (such as longer hours of operation), competitors can easily copy it
Step 4. Focus on the quality of the product or service
If you can't compete with your competitors on location or price, you can always compete on quality. This is all the more important if high quality is one of your strengths. Customers are usually willing to pay more or go farther afield to get a good product.
- Focus on using your unique talents and background. For example, if you run a restaurant business and have studied culinary arts abroad for three years, you can use the experience and contacts there to create truly unique recipes.
- Focusing on hiring the right people and using higher quality supplies can improve the overall quality of your product or service.
Step 5. Differentiate your products and services
Look for one or more outstanding attributes in the market that can set you apart from the competition. Then, look for market segments that think these attributes are important and market them to them. For example, what is your longest-lasting battery? People who love to travel need it. Lowest price? That's important for customers who have lower income. Free shipping? If you are the only one offering these facilities, you can definitely attract new customers.
The reverse process can also be applied by conducting research to determine what customers consider most important, and then developing a specific market for that product or characteristic. For example, people with arthritis have difficulty opening cans and jars. You can design a tool that makes it easy for them and then advertise it in the health media
Step 6. Establish cooperation with other companies
Partnership or cooperation with other companies is one way to gain a competitive advantage. Let's say you run a local equipment supply company. You can approach a local transportation company and offer a discount on the product in exchange for the faster, first-class local transportation. That way, you can offer your customers faster delivery than your competitors, giving you a competitive edge.
Part 3 of 3: Maintaining Competitive Advantage
Step 1. Create an “economic moat”
Take advantage of restrictive market entry policies to prevent competitors from operating in the same market. In some cases, the company's ability to manipulate barriers to entry and compete in the market becomes an effective means of battling new competition, fortifying the business and maintaining predictable profit potential.
For example, maybe you have a Thai restaurant in a mall. This can provide an economic moat as it is likely that a mall will not open multiple Thai restaurants at once in the same area. This prevents other businesses from competing with you
Step 2. Maintain your position
After gaining a business edge, your work is far from over. To be successful, you must continue to maintain a competitive advantage through pricing, product features, and marketing. For example, if you own a technology company, you should continue to design new products that are faster, cheaper, and have more functionality. After all, your competitors will not sit idly by and let you steal their market.
Sometimes you have to take the opportunity to stay ahead and differentiate your business from the rest, but big risks usually come with great success. Always remember to do your research before jumping into implementing a new idea
Step 3. Forecast future trends in your industry
A great way to forecast trends is to join a local professional association that offers speakers with expertise in your field as well as annual conferences. You will get an overview and see what competitors in your industry are doing.
Step 4. Study and monitor your competitors constantly
Look for updates on their website, log on to their mailing list, watch new product launches and keep an eye on their price changes.
Step 5. Adapt to customer wants and needs
Seek customer opinion regularly with online surveys and customer advisory boards. Your marketers need to be up-to-date with the feedback they hear from customers and prospects.
Tips
- Use business information resources. This is the era of the information revolution, so take advantage of it. Business information companies such as Cortera, Hoovers, Manta, Portfolio.com, and Goliath provide new ways for companies to outperform competitors by conducting research on products, target markets and pricing.
- As the market changes every day, focus on strategies that are flexible and support the competition.
- Make changes in size, feature additions, or costs in your promotional strategy to get your product ahead of the market.
- Small businesses can gain a competitive advantage by minimizing product and associated costs, thereby reducing prices to a point where competitors cannot match them. However, never sacrifice quality just to reduce costs.
