Your competitive advantage is what sets your business apart from your competition. It highlights the benefits a customer receives when they do business with you. It could be your products, service, reputation, or even your location. Do you know what sets your business apart from your competition? Here’s why it’s important to define your business’s competitive advantage.
Every business owner must be able to answer one very basic question, “Why should a prospective customer buy my product or service rather than a competitor’s?” If the owner cannot answer this question, he or she should probably cut his or her losses and seek alternative employment. Fortunately, this isn’t a complex question. At its core, there are only two possible answers; either the product or service is being offered at a lower price or the offering must be differentiated from the competition’s.
How to identify your competitive advantage
To identify your competitive advantage, you need to understand your competitors and your customers. Ask yourself:
- Why do customers buy from me?
- Why do customers buy from our competitors and not me?
- Why do some potential customers not buy at all?
- What do I need to do to be successful in the future?
Market research will help you to answer these questions. Good market research will reveal how your business is different from your competitors, and what you have to offer that appeals to your customers. In-depth customer research will help you identify your customers’ needs and increase your competitive edge.
When clients/customers buy your product or service, they are buying the benefit that it gives them. It may be that your product makes their life simpler, or your service helps them to feel better about themselves. Think about how your competitive advantage benefits your customers.
For example, the competitive advantage for a a cafe might be that they roast their own coffee and bake the best muffins on premises from organic ingredients. Note that different customers will see different benefits. Non-coffee drinkers will appreciate your muffins more than your coffee.
To be successful, every business owner must be able to explain why a prospective customer would buy your product or service rather than a competitor’s. The answer will be based either on lower price or a differentiated product or service. If the answer is based on differentiation, the product or service will have to be the most attractive alternative for a segment of the market that is large enough to sustain the business. Although this may sound straight forward, sorting this out can be complex and you may need to reach out for expert marketing advice. But, like most things in business, the rewards are worth the effort.