Let’s start with a working definition. Your competitive advantage is the benefit of your company which answers a target market’s want or a need, and which you provide better than your competition.
Competitive advantage can be any of a number of things, but it usually boils down to three basic categories–better price, better service, or better value.
So why do you need to find your competitive advantage? One of the biggest dangers to small business success is lack of differentiation, or being the same as everyone else. Why would customers buy from you if you’re exactly the same as every other company that provides your product or service? Why would they choose you?
They’ll stay with the guy down the street that they may have done business with for years rather than try your product or service because there’s no incentive for them to change. Or, if they’ve never bought what you offer, they’ll go with the company they find first in the yellow pages or the local newspaper ads.
The point is, getting them to choose you if you’re the same as everyone else is like shooting craps or playing roulette. There’s one chance in ___(fill in the blank with the number of competition your small business has).
But, how do you go about finding out what your competitive advantage is? If you’re like me, you want to know how to do it step by step. And the answer actually lies in the definition, so let’s break it down.
First of all, it’s a benefit. To find your company’s benefits, list all the features of your product, service or business as a whole. For every feature you’ve listed, identify the benefit to your target market.
Sometimes it’s difficult to tell whether something is a feature or a benefit. It’s a feature if it answers what the product or service does. It’s a benefit if it tells you what need or want it will satisfy. Here’s a test for determining a benefit’s strength: if you can’t convincingly answer the question “So what”? to the benefit, it probably isn’t strong enough.
Second, it needs to answer a want or need of your target market. If what you’re offering isn’t something your target wants or needs, who’s going to buy it? This statement has a two-pronged approach.
You need to identify both a target market and that target market’s wants or needs. And, maybe keep in mind that wants are more important than needs. People usually buy from an emotional level first and justify it later. So who exactly is your target market, and what do they want? And the stronger your target market’s wants, the easier it is to sell that want to them.
Third, you need to provide that want or need better than the competition. To do that, you need to first identify your competition. And then you need to spy on them just a little. But please make it ethical spying. Pick at least three competitors, find out who they are, how similar their product or service is to yours and try to determine their benefits.
One of the best ways to find out about your competition is to visit their website. You can often find enough direct and indirect information for a good start in your investigation. Or you can visit their store. Or write them a letter requesting information.
Consider buying something from them. How does your product or service compare with theirs? What’s their service like? Do they have a guarantee or return policy? How does your price compare with theirs?
Now take all the information you’ve just gathered about those competitors, and list their features and benefits just like you did for your own company. Which of the benefits you’ve listed about your company are not on the list of your competitors’ benefits? Those benefits are your competitive advantage.
Voila, just like that you’ve found your competitive advantage. And here’s one more reason why you need to find it. Your competitive advantage forms the basis for all your marketing materials. Your tagline, your web site, direct response, brochure, etc. etc.