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Finding a "Competitive Advantage" posted by Peter J. Patsula

Clarify your position in the marketplace. Differentiate your products and services to gain a market share.

In the development of a business plan, one of your most important objectives is to clarify your position in the marketplace and provide defensive and offensive strategies to beat the competition and gain a market share.

This means developing and summarizing your "competitive advantage."

Offensively speaking, the quest for a "competitive advantage" often inspires entrepreneurs to imitate the strategies of successful companies. Ironically however, at different points in time, a competitive advantage can become a weakness. To prevent this, entrepreneurs must constantly revaluate their target market, the competition, and their company strengths and weaknesses.

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FOUR STEPS TO DEVELOPING
YOUR COMPETITIVE ADVANTAGE
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The following step-by-step plan is based on "Know Your Competition and Increase Your Competitive Advantage" by the Galveston County SBDC"
http://www.gc.edu/sbdc/articles/article5.htm

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STEP 1
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Develop a competitor profile.

Don't underestimate the power of your competition and over estimate your ability to gain a market share. Be aware that most businesses easily get so wrapped up in day-to-day operations that they fail to adequately evaluate the impact of their competition. To prevent this, list and keep track of the following key areas about your competition:

- Major Products and/or Services
- Location(s)
- Years in Business
- Number of Employees
- Dollar Sales
- Unit Sales
- Market Share
- Financial Stability (cash flow)
- Profitability
- Management Capabilities
- Key Employees
- Key Customers
- Hours of Operation
- Quality
- Image in the Community
- Pricing
- Advertising Themes
- Promotion and Public Relations Efforts

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STEP 2
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Build a competitive matrix chart.

After developing competitor profile's for at least five of your competitors:

(a) List down the side of a blank page, all the criteria a customer considers when choosing a product or service such as yours. A car owner for example, when choosing a auto mechanic, might look at cost, hours of service, days service is available, amount of time it takes to get a quote, quality of work, after service care, name recognition, advertising, insurance, guarantees, and speed of service.

(b) Across the top of the page list your top five competitors, plus yourself.

(c) Rate each competitor on each item. To do this, shop the competition. Talk to friends, acquaintances, or vendors familiar with these companies. Buy products from your competitors. Study their advertisements. Get a quote or obtain their marketing material. If necessary, pose as a customer to get the information.

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STEP 3
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Evaluate your strengths and weaknesses to determine:

a. What do my competitors do better than me?
b. What do I do better than my competitors?

Then, differentiate yourself from your competitors by asking:

c. What will cause customers to buy from me instead of them?

The above competitive analysis will enable you to emulate your competitor’s strengths and use their weaknesses to your advantage. You will discover voids in the market place that you can fill.

"For example, a plumber may discover that none of the local competitors operate over the weekend. This is a niche the plumber can fill. His competitive advantage then becomes, weekend service. With your newfound knowledge, you can explain in your business plan, your market niche, your competitive strategies and the tactics you will use to capture your market share" (Galveston County SBDC).

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STEP 4
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Regularly update your competitor profiles and matrix chart throughout the lifetime of your business.

"New competitors enter the market while others leave. Customer’s needs and expectations shift. New products and different services fight for their dollar" (Galveston County SBDC).

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COMPETITIVE ADVANTAGE
STRATEGIES
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Outlined below are ten standard competitive advantage strategies:

1. Clearly differentiate between your company and the competition.

If a customer says, "Joe Blow's Computer Services only charges $50 for a service call, why do you charge $65?" You can confidently respond that Joe charges less because he does not guarantee his work. Further, Joe is not covered by liability insurance. Furthermore, Joe does not do service calls after 6:00 p.m. or on weekends. Your competitor knowledge has now become your competitive advantage. "You have successfully differentiated yourself from a competitor giving your customer a valid reason to choose you over them" (Galveston County SBDC).

2. Offer competitive advantage pricing.

In competitive advantage pricing, your prices are set equal to, above or below those of your competition. This strategy requires you to constantly shop your competition. A variation of this is the "we-won't-be-undersold" approach where you offer to meet or beat the prices of all your competitors.

3. Position yourself against older products.

This competitive advantage strategy is particularly effective when used to introduce new products that differ from traditional products. Lead-free gasoline was at one time positioned against leaded gasoline as being cleaner burning and more friendly to the environment.

4. Compare your product or service favorably to a competitors.

Using this strategy, you make implicit or explicit comparisons. Implicit comparisons never mention the competitor's name though the inference is obvious. Often the unmentioned competitor is made fun of or looked down upon. Explicit comparisons can make a comparison with a direct competitor (usually the market leader), with the goal of attracting their customers (e.g., the Pepsi Challenge).

5. Disassociate yourself completely from the product class.

This competitive advantage strategy is particularly effective when used to introduce new products amongst heavy competition. For example Intel with its Pentium Chip attempted to disassociate itself from its 8086, 286, 386, and 486 lineage in an effort to lessen the gains made by other chip manufacturers such as AMD and Cyrix who were steadily making inroads into their market.

6. Offer a range of packages for the same product.

This competitive advantage strategy involves selling the same product in a range of packages of different sizes, design or even label as well as using different distribution channels to reach the various segments that each packaging variation targets. Beer, for example, is sold in kegs, cases, twelve-packs, six-packs, twelve-ounce cans and bottles, on tap, and by the pitcher.

7. Promote a specific use for your product.

This competitive advantage strategy works best when you can easily teach your customers how to use your product via a promotional medium that allows a demonstration. Commercials showing how many ways you can cook eggs or use cheese are two examples of this kind of positioning in action.

8. Promote a unique product or service benefit.

This competitive advantage strategy is generally more effective then positioning by features because it is easier to sell customers on what your product or service can do for them rather than explain to them how it does it. Complicated features are nice to discuss with tech-nerds, but unless customers can be made to understand how something will benefit them, they may not get the point, and you may not get the sale.

9. Promote a unique product or service feature.

This strategy is very common whether you're selling services or manufactured goods. As long as your product or service has some unique features of real value to your customers, this may be the way to go. However, don't try and promote every feature you have. You must realize that your product or service cannot be all things to all people.

10. Target the user.

Using this strategy, you direct all your promotional efforts to using models in your advertising that the target customers can identify with. The models used aren't necessarily gorgeous or handsome. They are more like everyday folk with everyday problems, and are always shown in a positive light after using the product or service.

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