March 6, 2023
Reading time: 6 mins
A competitive advantage is what your business does better than anyone else. It’s your secret sauce: the reason people want to do business with you, rather than the competition.
Here are some common types of competitive advantage:
- Price: You charge less than competitors in a market that is price sensitive.
- Specialization: You focus on a specific niche of the market as opposed to the whole market (usually a niche that few businesses have noticed).
- Differentiation: You have the same product or service as others, but you’ve found a unique way to modify it, or market it, or target a specific customer base, that no one else has figured out yet.
Business is global and digital now, which means there’s more competition than ever before. Keep reading this article for ideas that you may not have considered yet. Other sources of competitive advantage include:
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:
- Asking customers what they value the most about your staff, then encouraging your staff to do that consistently. Add these behaviors to their job description.
- Lock in key staff with incentives or bonus schemes that they lose if they leave.
- Ask your staff what a healthy and positive work environment looks like, and make changes to the workplace accordingly
- Motivate your staff by highlighting their achievements, and lock in key staff with incentives or bonus schemes to motivate your employees
2. Location, location, location
If you have a great 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 puts your business in a better location.
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 contracts come up for renewal and try to be on the list to pitch.
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 winning strategy that the competition will struggle to replicate…Try to:
- Identify any business 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. 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 unique “business owner” image by:
- Becoming an authority in your field and a spokesperson for the industry. Get onto boards or groups that will listen to what you say.
- Speaking at events, conferences and getting in front of customers any way you can.
- Sponsoring your community by getting local and giving your time to charities.
- Speaking up and turning up everywhere you’re invited to.
6. Being on great terms with your suppliers
Managing your suppliers and their sales representatives is often-overlooked as a competitive advantage, but it can be especially useful if they give you preferential pricing, more inventory allocations or industry updates. Apart from paying your bills on time, you can keep your suppliers happy by:
- Providing them tickets to a game or rewarding them for their support with a gift. 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 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. This will make it harder for other businesses 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 the United States Patent and Trademark Office 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.
- Identify the most critical elements of your business, then have a document that tells you how to ensure they remain an advantage to your business.
And remember that competitive advantage only exists if your customers recognize it, so incorporating persuasive arguments into your message is crucial (your marketing strategy and messaging have to make it clear why your company is better).
Over time, it's important to check in and 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.