Domotique

Why it’s important to have a competitive advantage

Your business needs every edge it can gain over rivals which is why having a competitive advantage that creates greater value for your business is vital.

There are three kinds of core competitive advantage:

  • Comparative advantage also known as cost advantage, it’s a business’s ability to sell a product or service at a lower price than its competitors.
  • Differential advantage when a business’s products or services differ from its competitors to the point where customers see them as the better choice.
  • Focus or niche advantage where a business is known for a particular skill or expertise which they are the very best at.

Your business’s market positioning and pricing strategy are linked to its competitive advantage. For example, if you sell the most luxurious yachts on the market, you’ll look to price above your competition and convey an image of top quality to attract wealthy buyers who want the best. You are unlikely to discount.

Having a valid competitive advantage will help your business stay competitive – and most importantly, keep you in business.

Identifying your competitive advantage

By clearly understanding your competitive advantage you can adapt your marketing strategy to emphasize it.

Some competitive advantages that might help you differentiate your business from the competition include:

  • Expertise – if you’re a specialist in your field, consider using your years of experience in your industry to your advantage.
  • Uniqueness – do you have a distinctive product or service? You won’t be compared on price or product as you offer something completely different. Play on your uniqueness in your advertising material so prospective customers want to find out more.
  • Process – if you run your business more efficiently than others, this may be your competitive advantage. More efficient and streamlined processes could allow you to price lower, deliver faster, or give superb service.
  • Relationships – by making your customers feel special and well looked after, you’ll build strong relationships over the long-term. Consumers that feel like they matter to a business will return as repeat customers.

Start off by focusing on just one competitive advantage and placing all your energy into perfecting it. Once established, you could think about identifying another competitive advantage to enhance your business’s appeal.

 

Types of competitive advantage

There are plenty of different kinds of competitive advantages – take into account what your competitors are great at before choosing which one will give your business the best results.

Location

Having a great location is essential if you’re a retailer. Your competitive advantage could be the amount of foot traffic that passes by your store if you lease or own a building on the main shopping street. If you don’t have a great location yet, have a thorough look around town to see where the prime real estate is – keep your eye on those locations in case an opportunity arises. For those businesses that don’t have a great location, they’ll have to think outside the square – maybe offering free delivery with online purchases, or getting their products to customers through wholesale or other retail channels is the way forward. For help with funding to secure your prime location, see our flexible finance strategies.