How to Sustain a Competitive Advantage and Grow Your Business
Dominate competitors and become a leader in your industry.
Like every other business, I wanted to be better than my competition. To do that, I did what most of them did: made bold claims, promised great service, and hoped people would buy.
But I soon found that it takes much more than that to create and sustain a competitive advantage. So, I set out to discover how.
What did I learn?
A lot. For starters, you must be bold and willing to do some things no one else is willing to do. You must buck some trends and stay true to yourself.
Most of all, you need strategy.
In this article, I’ll show you:
- what you can do that will set you apart day one
- the secret to premium brand positioning
- why competing on price is a bad idea and how to overcome price pressure
- why niching down rarely works and what to do instead
Let’s start with the strategy that makes the most impact of all.
Create a Competitive Advantage by Knowing Your Customer
You cannot underestimate the importance of understanding your target market. It’s essential to creating and sustaining a competitive advantage. In fact, this alone could make all the difference for your company.
But what does “know your customer” mean?
To gain insight, consider the customers you have now. Who are your favorites?
It’s likely that they are the ones:
- you enjoy working with most
- provide the greatest share of revenue
- refer people they know
When observing this group, do you notice any similarities? What do they have in common? Keep a record of these things.
You can learn a lot from your best customers. Studying them can help you uncover buying triggers. These are specific needs or desires that prompt people to make purchases.
For example, if someone tells you they bought a car last week, ask them why they picked that particular model. You can ask in a way that isn’t intrusive by working the question into casual conversation.
Learning why people buy something will provide insight into their decision-making process. You will find out what matters to them most as they consider their options.
Use this information to develop your ideal (or best) customer profile. Over time, you will know more about your target market than any of your competitors.
The more accurate your data is, the more reliable it will be. That is why you must focus on studying those who fit your target profile. Avoid soliciting opinions from people who aren’t qualified prospects.
Here is a list of questions to help you with this process:
- What do the people in your audience worry about?
- If your product or service didn’t exist, what would they replace it with?
- What features and benefits do they care about most?
- Does your business meet those needs?
- What prompts them to buy?
- How much time do they invest in researching options?
Most of all, observe their emotions. It’s true that people buy products and services to meet a need. But it may surprise you to know that emotions drive most purchases.
Getting to know your customer to this extent is an ongoing process. But making the commitment to it will set you apart the day you begin.
People want to buy from brands that share their values. But you can’t understand your customers’ values unless you go beyond demographics. Yet most small businesses only know the basics about their customers.
Be So Good They Can’t Ignore You
Comedian Steve Martin was once asked what it takes to be successful. I love his response.
He said, “Be so good they can’t ignore you.”
Aspiring to be the best in your industry feels intimidating at first. The goal is not to achieve perfection, but to improve every day. Forever.
People appreciate excellence. When your business ensures high standards, your audience will notice. When they do, it will be a sign that you’re becoming a competitive force.
Continuing to improve is crucial to innovation and will keep your business relevant. It also builds authority and strengthens credibility.
Once they reach a certain level of success, many businesses become complacent. The ones that continue to improve will always hold an advantage over those that don’t.
Striving for excellence is foundational for premium brand positioning. Many well-known luxury and premium brands sacrificed profit until they perfected their craft.
This takes discipline and commitment but is a trait of all industry leaders.
Here Today, Gone Tomorrow
What works today won’t work tomorrow. Be receptive to change because it will come. It’s unlikely that you will be right about everything. Experience will be your best friend in most situations, but outliers exist. Keep an open mind and look for trends.
The key is to determine if a trend is temporary or an indicator of permanent change. You may have to create other products or services to get more growth or offset a decrease in sales. Targeting other demographics may be another solution.
Tracking and studying data is the most reliable way to discern trends. You must confirm your suspicions and hunches before taking action. This data doesn’t have to be complex, but it should be thorough. Use information relevant to your industry’s growth and to your business.
While staying on the wrong course for too long can be a mistake, it isn’t always a good idea to pivot either. It’s important to know your limitations. Changing direction could mean putting your business in uncharted waters.
Be sure your company is ready to meet the challenges that come with change. Otherwise, you may not find out until it’s too late.
Sustain a Competitive Advantage by Being One in a Million
Creating differentiation will set you apart from competitors. To do it, you must know your audience, competitors’ offers, and vital market dynamics.
The goal is to position your business as the ideal solution for your customer’s problem. This process is like the one used by attorneys to build a case in court.
Being the “best” is subjective. Customers will hesitate to believe you product is better unless you offer proof.
Focus on building perceived value for your product or service. The more value your customers believe you offer, the more likely they are to buy.
How do you build perceived value?
Start with what is most important to your customers. We already explored this in a previous section (Know Your Customer). Once you understand what they want from you, analyze competitors.
- What are the functional and emotional benefits of their products or services?
- How do they communicate with their audience?
- What buying triggers do they leverage?
- Who do they target?
- What is their value proposition?
- What is their sales process?
- Do they make promises or guarantees?
- What is their brand image? (colors, packaging, attitude, etc.)
- What is their pricing structure? Do they have high-, mid-, and low-priced offers?
Compare these with your business and with what you know about target customers.
Do you see any weaknesses you can exploit? Can you deliver any benefits they may have missed? Can you do a better job of connecting to your audience?
A full analysis will help you provide proof that your offer is the ideal choice.
Why You Should Never Compete on Price
Using the “lowest price” to make sales rarely creates a competitive advantage.
First, it seems someone will always sell for less. Some businesses undercut prices just to prevent anyone else from winning the sale. This might make sense on a rare occasion. But in most cases, this isn’t a good strategy.
Second, businesses that try to be the cheapest option end up devaluing their offer. By doing so, they end up becoming a commodity. This is the antithesis of premium positioning.
The current COVID-19 pandemic has forced many businesses into a bad situation. Many are trying to make sales at all costs. This is understandable and price reduction strategies may be beneficial in this case. But it still isn’t a good long-term plan.
Should you choose to sell at lower margins, think about the implications of working for less. Remember that when you set a precedent, it’s difficult to change it.
The “Niche Down” Strategy
We live in an era of specialization. The idea is that focusing on a narrow market makes you more qualified to serve that segment. This is a popular positioning strategy, but its effectiveness is often overestimated.
Some business owners think that targeting a niche will be enough to differentiate. But it isn’t.
I once spoke with a fitness company that targeted male corporate executives. They felt confident in their ability to serve that market.
But within that segment, there were several sub-segments. I’m sure some of these men were married, others divorced. Some had children, others didn’t. The fitness company had not accounted for the needs of each segment. Not doing so made them ill-prepared to deliver on many levels.
You can take advantage of competitors that have failed to dig deeper. Again, this goes back to the Know Your Customer rule we discussed in the first section of this article.
Sustain a Competitive Advantage with Brand Communication
How you say something is as important as what you say. Perhaps more. Your brand messaging is key to building and sustaining a competitive advantage.
Many business owners assume their customers know what they do. For this reason, they fail to communicate with a clear, concise message. They don’t realize that people may be unsure about how their products or services can help them.
It’s also important to communicate with consistency. Most people will come into contact with your brand every now and then. You may get bored repeating the same messages over and over. But keep in mind that many will be hearing it for the first time.
Communication strengthens your relationship with your target audience or weakens it.
A Process for Creating and Sustaining a Competitive Advantage
Building a brand helps your business establish and maintain a competitive advantage.
Your business’s messages, images, and associations work together to form its brand. That brand attracts people to your business or pushes them away.
Whether you realize it or not, this is happening right now, even as you read this article. Every time people come into contact with your company, they will make a decision to engage with it or move on.
The branding process provides a way to create the impression you want to make on your audience.
Here are some examples of how branding can help a small business:
- helps you create an identity that will attract the kind of customers you want
- makes it easier to communicate your value
- simplifies the process of prioritizing goals and expenditures
- clarifies your marketing messages and makes them more effective
- improves your offers, giving them more audience appeal
- develops a stronger connection with future and existing customers
Most small businesses don’t have a brand plan or know how to create one. This provides an excellent opportunity for those that have a well-designed brand strategy.
People will always have preferences when it comes to the businesses they buy from.
Branding helps you create and communicate those preferences. It allows your business to differentiate and build perceived value. It also reduces price pressure and helps you defend against competitive attacks.
The more you differentiate, the more difficult it will be to steal or copy your products and services.
Follow through on your brand promises. While most businesses believe they do this, many don’t. Systems and processes must be in place to ensure quality and service. These will increase customer retention as well.
Use all of the strategies in this article to create and sustain a competitive advantage. Even after becoming an industry leader, there is still a lot you must do to stay there.
We’re here to help. If you have questions, email me personally at [email protected]
Until next time,
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