A competitive advantage is what your business does better than anyone else. The compelling reason for people to do business with you, rather than the competition.
Common types of competitive advantage are;
- Price. You charge less than competitors in a price sensitive market.
- Expertise. You service a specific niche market that no other business seems to have noticed or you do it better.
- Differentiation. You have the same product or service as others, but you’ve found a way to alter it, or twist it, or sell to a certain market, that no-one has worked out what you’ve done.
The problem with these characteristics is that they’re often hard to maintain. Anyone can find a way to be cheaper, or offer something new, and with the internet and businesses operating globally, it’s even harder to prove you have a true competitive advantage.
Compelling reasons you can implement
We’d suggest adding to the above with competitive advantages that are difficult to replicate.
Here are some you may have not thought about.
1. Your staff
One of your best competitive advantages could be your staff, as it’s impossible for another business to replicate them. The advantage of having friendly, knowledgeable, proactive staff must never be underestimated. The key is to make sure that your staff are motivated, trained and perform well. Do this by:
- Ask customers what they value the most about your staff, then encourage them to do this consistently. Add these habits to their job description.
- Lock in key staff with incentives or bonus schemes that they lose if they leave.
- Ensure key staff have employment agreement clauses that prevent them working for the competition if they leave (within a reasonable timeframe).
2. Location, location, location
If you have a great historical location, it’s hard to move you out. Make sure you;
- Protect your lease by negotiating longer terms, or rights of renewal in advance of any expiry.
- Look at the option of owning your own premises.
- Review local population trends, as new locations may actually be better than where you are. Don’t be afraid to move if that future proofs your business.
3. Unique or exclusive contracts
You have an advantage if you can source product or deliver services that the competition cannot. For example;
- You’re importing products from an overseas supplier that promises to only supply your business. Get a contract that confirms this.
- You have a contract of work that has you as the only provider. Many larger corporates, councils and government contracts have a single supplier (it’s often easier for them to only deal with one company). If this isn’t you, find out when these tenders come up for renewal and try to be on the list to pitch.
4. A partnership
If you can find another business that is prepared to refer work your way, or even better, integrate you into their business, you’re onto a winner that the competition will find hard to break.
- Identify any businesses that would be an ideal partner and draw up a plan to get in front of them. You never know, they may be thinking the same thing.
5. Improve your credibility and authenticity
Your personality can be a huge competitive advantage. No one else has quite your mix of skills and experience. You can build a ‘character owner’ image by:
- Become an authority in your field and a spokesperson for the industry. Get onto boards or groups that will listen to what you say.
- Speak at events, conferences and try and get in front of customers any way you can.
- Sponsor your community by getting local and giving your time to your charities.
- Speaking up and turning up to everything you’re invited to.
6. Be on great terms with your suppliers
Managing your suppliers and their sales representatives is an often-overlooked competitive advantage, especially if they give you preferential pricing, more inventory allocations or industry updates. Apart from paying your bills on time then you could also:
- Provide tickets to a game or any other reward for their support. Suppliers rarely get a customer saying thanks. If they are unable to accept gifts, donate to their charity.
- Refer work back to them.
- Partner to on-sell their products or services to your network.
Being linked to a large, well-known supplier is a definite competitive advantage. You might find that they do most of the market research, develop new products, conduct customer analysis and provide nation-wide branding and advertising that enhances your credibility. An independent will find it more difficult to compete with you.
7. Collaborate with other businesses in the industry
One of the best ways to compete against larger businesses is to partner up with similar size businesses. These could be formal alliances and joint ventures, such as an official buying group to gain better discounts from suppliers than you would if you ordered on your own. Or it could be unofficially referring business to each other, marketing together or exchanging great ideas to grow.
Finally, defend your position.
Make sure you protect your competitive advantage. The more successful your business, the more competitors may want to take some of your market share.
- Have confidentiality agreements signed by all staff.
- Visit your government’s website or speak to an IP expert to see what you can protect legally.
- Keep any secrets secure either in locked cabinets or secure online.
- List what is mission critical to your business, then document how to ensure they will remain an advantage to your business.
Remember a competitive advantage only truly exists if your customers are aware of it, so blending your compelling reasons into your message is essential. Feed it into your marketing plan, making it obvious to your customers how your business is different and unique.
Remember to regularly review your competitive advantage. The market changes, businesses come and go, and your advantage may have diminished over the last year. Ask your regular customers how you’re doing – they’ll let you know if your advantage is fading.