Smart business owners have their competitive advantage front and centre at all times.
“Competitive advantage” answers the question, “Why will customers buy from you instead of your competitors?” It’s the starting point to positioning your products and services in the mind of your customers, the key to setting yourself apart from other businesses, and critical to the success of any enterprise.
Here are a few competitive advantages and examples of their use in the marketplace.
1. The First. Being the first to offer goods will be an advantage over other businesses. The downside of this advantage is that it rarely lasts for long, because others will soon get the scent of success and jump in to compete for a piece of the action.
2. The Best. One way to distinguish your business from the others is to offer products and services of higher quality. Being the best is an enviable place to be, because everyone wants to deal with and be associated with the best.
3. The Cheapest. The Dollar Store business model has parlayed this advantage into a highly successful chain of establishments. Interestingly, the franchisor’s website claims to be “Canada’s largest franchised dollar store chain and the fastest growing concept in retail.” “Largest” and “fastest growing” are advantages designed to tug at the heart strings of potential franchisees, while the basic business case is built on offering goods for a buck.
4. The Fastest. Fast food services and drive through lineups are visible evidence of this competitive advantage at work. Everywhere you look something claims to be fastest: fastest car, fastest computer, and fastest weight loss program.
5. Convenience. Small corner stores in high profile locations turn convenience into profit, while pizza delivery drivers turn it into part-time self-employment. This competitive advantage commands higher margins for making customers lives easier.
6. Technology. Newer, better or faster technology can lead to savings or a superior experience for customers. Technological advantages can position a business ahead of competitors, at least for a few blinks, until the next miracle blasts its way into the marketplace. Have you tried to get your VCR fixed lately?
7. Secret Formula. The Coca Cola Company is still a surefire example of leveraging a “secret formula” to massive gain. According to Wikipedia, the business offers “more than 400 brands in over 200 countries or territories and serves 1.6 billion servings each day.”
8. Exclusivity. An exclusive agreement with a manufacturer will provide a competitive advantage over other retailers. Winning a contract from an established organization, such as a government agency or a larger corporation, can also be a competitive advantage. A pitfall for this business strategy is the tendency to drift into being a one-legged pony, relying on one or two contracts for survival. Unless the owner is diversified, the business can evaporate when the contract ends.
9. Qualifications. Work experience and education are commonly used to advantage, both in business and when competing for jobs. A handsome set of credentials sweetens the deal for any potential buyer.
Competitive advantages don’t last forever, they evolve. For example, a business that is successful by being first will almost immediately find competitors on its doorstep, vying for a piece of the market. Being first might be an advantage for a while, until someone else offers a more enticing deal to customers, like lower prices, a faster service, or higher quality products.
In business, you don’t have the luxury of creating your competitive advantage and then forgetting about it. Smart business owners continuously innovate to stay at the forefront.