Companies which don’t understand their competitive advantage say things like, “Our product is better quality,” or “Our service is better.” Even if a company has better quality or better service, it won’t convince its customers just by saying so, because many of its competitors will be saying the exact same thing! You have to define quality or show how your service differs from the competition.
The best way to determine your competitive advantage is to break down the components of your product or service into four distinct categories:
Competitive uniqueness: What can I do for my customers that no one else can do? What can I offer that no one else can offer?
Competitive advantage: What can I do for my customer that my competitor can also do, but I can do it better and I can prove it?
Competitive parity: Objectively speaking, my competitors and I are the same here — no real differentiation.
Competitive disadvantages: Where does the competition have an advantage over me?
You may want to do your analysis by market segment, by competitor, by product, or all of them, but knowing your competitive position will quickly get you onto your customers’ wavelengths.
An example of competitive uniqueness exists if a pharmaceutical company receives FDA approval to sell a new drug. Since no one else has the drug, this company now has a competitive uniqueness with this drug.
An example of a competitive advantage might be where two companies market the same drug, but one is a large well-known company with wide name recognition and the other is a small relatively unknown company. If no real competitive advantage exists in your product, try to focus on your company reputation, your excellent service, your responsiveness and reliability, or any other factors than can positively differentiate you from your competition.
Competitive parity — what things are the same between the competition and us, but are still important to the customer? Birth control pills are a good example. Several ethical drug companies make different formulations, but all with similar records for preventing pregnancy.
And finally, competitive disadvantage —what does the competition do better than you do? Your drug may have more side effects than the competitor’s.
By doing this analysis, you’ll be in a position to help your customers distinguish between you and your competition.
In order to discover your competitive advantage, you may have to do some intelligence gathering — talk to your customers, your salespeople, watch the local newspapers, attend trade shows, talk to your customers’ suppliers, build a file of your competitors’ marketing and product information, do a debriefing when you lose a customer to a competitor, use a clipping service to gather information on competitors or on major prospects, obtain annual and quarterly reports of your competitors and prospective customers, watch the market trends in your industry and in your customers’ industries—become the expert on your product or service and how it can help your customers.
Knowing and being able to articulate your competitive advantages sets you apart from your competition and clearly shows your customers what your company can do for them that no one else can do.