More often than not, you will face plenty of competition from other businesses offering similar products or services, so a competitive advantage is essential for any business to thrive in today's market. Consumers are also savvier than ever, and they can easily search online to find out about your competitors' offerings, pricing, and many other factors that will impact their buying decisions. All of this means that it's getting more and more important for businesses to develop a competitive advantage that sets them apart from others in their industry. It can help create a preference for a company among its target audience and help drive sales, referrals, and profits. Understanding how to identify and use your competitive advantages will help you create effective business and marketing strategies that can give you an edge over your competition. This Union Commercial Capital blog post explains how to gain a competitive advantage. What can businesses do to earn a competitive advantage, and keep it? Here are a few strategies that will differentiate your business as well as retain your customers throughout their entire buying lifecycle.
What is a Competitive Advantage?
A competitive advantage is a business’s edge over its competitors; it makes customers choose one business over another. To achieve a competitive advantage, companies must consider various elements and factors. These include pricing strategies, customer service strategies, marketing strategies, product/service differentiation, and operational efficiency.
All these elements must be considered when creating a competitive advantage strategy.
A competitive advantage doesn't necessarily have to make your business more competitive in the eyes of all consumers, only in the eyes of the specific target market segments your business is competing for. This means that in each industry, many businesses can have competitive advantage over each other, it just depends on which advantages a consumer prioritizes when making a buying decision.
Examples of Competitive Advantages
Some commonly cited types of competitive advantages for product-based businesses are lower cost of materials through economies of scale, lower shipping costs, access to unique raw materials, favorable geographic location, unique technology, and high barriers to entry for new competitors. These are all things that can give a product-based business a comparative advantage over other businesses, enabling them to offer a more high-quality product, a cost advantage, or better service.
Competitive advantage for service-based businesses can include specialized knowledge and experience, unparalleled customer service, or valuable industry experience.
Get Started
Before you can map out your strategy to get an advantage over your competitors, you need to conduct a competitor analysis, which is an essential part of any business strategy. It helps to identify areas of opportunity and potential threats in the market. By analyzing your competitors, you can gain insights into their strategies and use them to inform your decisions.
Competitor research involves looking at your competitors’ actions regarding product offerings, pricing, marketing strategies, customer service, etc. With this information, you can make informed decisions on how to position your company in the market and capitalize on growth opportunities.
Differentiate Your Products & Services
Look for one or more marketable attributes that you have that can set you apart from your competitors. Then find the segment of the market that finds those attributes important and market to them. For instance, do you have the longest battery life? Frequent travelers need this. The lowest price? That's important to customers as well. Free shipping? If you are the only one offering this it could attract new customers.
Have an Effective Pricing Strategy
Developing an effective pricing strategy can give your business the edge to stand out from the competition. Take a look at your competitors’ prices, and adjust yours if need be. The goal is to offer quality products and services at prices that are lower or competitive with other comparable products and services. When setting prices, ensure that you are maximizing your profits; otherwise, you might need to set unrealistic sales goals that you and your team will find challenging.
Effective pricing strategies are the first competitive advantage businesses often attempt to gain. To use this strategy, a company must find ways to produce goods at a lower cost through the perfection of production methods or by the utilization of resources in a more efficient manner than competitors.
Utilize Technology
Utilizing the latest technologies can help your small business gain a competitive edge. Technology can be used to automate processes, track customer data, monitor inventory, improve efficiency and reduce costs. It can also be used to create innovative products and services that can differentiate your company from the competition.
By utilizing technology, you can gain an advantage in the market by providing better customer service, faster delivery times, and more personalized experiences for your customers. Technology-driven competitive advantages are essential for businesses to stay ahead and remain profitable in the long run.
Examine Your Business's Unique Strengths
Examining the strengths of your business can let you know which areas you can build on to create a competitive advantage. Ask yourself, "Why do customers buy from me?" The answer to this question will help you understand what value you offer them. For example, if you own an Italian restaurant, the quality of food, the location, or perhaps the speed of the delivery service may all contribute to a customer choosing you over your competition. Also, don't be afraid to ask your customers directly. You can make a survey for them to fill out, or just approach them, but your key objective is to discover why it is they choose you. If many customers mention your quality of food, you can work on other aspects of your business to create an even greater advantage.
Attract The Best Talent
Finding the best people isn't just important for productivity and cost reduction. It's also important because having happy, well-trained employees means that your customers have better experiences. Customers know the difference between buying from a company where workers aren't happy or knowledgeable. They know that when workers are supported, the quality of care is better and products have fewer issues. Customers want to buy from companies that take care of their people because this means that they take care of their customers. Top-notch customer service results from well-trained employees who understand their roles and are committed to meeting or exceeding customers' expectations. This provides you with a competitive edge.
Even when faced with stiff competition, having a competitive advantage provides you with greater opportunities to close more business. More importantly, the stronger your competitive advantage, the greater your ability to sustain a position of strength in the market no matter its conditions or level of competition.
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