To stand out in a competitive marketplace, you’re going to need a specific advantage that appeals to potential customers.
Believe it or not, a competitive advantage can make or break your business. If you don’t have a clear advantage, there’s a good chance your business idea isn’t going to work out.
Your competitive advantage is that one attribute that’s going to give you the opportunity to stand out amongst your many competitors.
A competitive advantage shouldn’t be confused with a mission statement though, it needs to be difficult, or impossible, to duplicate. Remember, your competitive advantage is what’s going to bring you new customers and drive more revenue so if anyone can easily imitate it, you may want to relook at your options.
Types of Competitive Advantage
There are 4 main types of competitive advantage that most businesses work to gain:
- Cost Leadership. This particular competitive advantage is centered around price. To gain this advantage, businesses will attempt to offer a high-quality product or service at a better price than their competitors. This advantage can usually be achieved if a business is able to produce products at a lower cost by adopting more efficient processes and finding the right resources. Technology can also play an important role in achieving a cost leadership advantage.
- Differentiation. Businesses that are able to identify a marketable attribute that can set them apart from their competitors can use differentiation as a competitive advantage. Using these unique attributes, businesses can market them to a segment of the market that would find these attributes appealing. Businesses could even conduct market research beforehand to determine which attributes a specific segment of the market would consider important.
- Defensive strategy. If a business already has an advantage that it can use against its competitors, it can adopt a defensive strategy that will further distance it from competitors. For example, a business could already have a cost leadership advantage that it can work to keep in place to maintain its position in the marketplace.
- Partnerships. Another route that businesses can take is to seek strategic alliances with businesses that are either in the same industry or a related industry. There is a fine line between collusion and an alliance though so businesses need to tread carefully. In a strategic alliance, businesses can pool their resources and gain additional exposure in the marketplace.
In recent years, businesses have been adding additional advantages to this list, including brand loyalty, high levels of funding, and barriers to entry.
The business landscape is changing all the time, which means that there are multiple routes that businesses can take to stand out from their competitors.
Developing a Competitive Advantage
There are 3 key elements that need to be included in the development of your competitive advantage:
- Target Market. You won’t be able to construct a competitive advantage if you don’t know who is, or will be, purchasing from you. Establish who buys from your business, the attributes that are important to them, and who would start buying from your business if you had to implement certain strategies.
- Competitors. Knowing who you are up against will ensure that you have a better idea of how your business will be able to make a significant difference in the marketplace. When reviewing competitors, cover aspects such as their pricing as well as their branding and marketing strategies so that you know exactly where your brand can fit in and stand out.
- Benefits. Lastly, businesses need to be clear on how their products or services will benefit consumers. Keep in mind that features are not benefits – you need to make this all about your customers and how their lives will be impacted by buying from your business.
The work doesn’t end once you’ve developed a competitive advantage though. If you’ve managed to stay one step ahead of your competitors, you need to do everything you can to maintain that position by adopting a defensive strategy.
Staying abreast of changes in the marketplace will also give you key insights into how you can stay ahead of the game.