A competitive edge is what supposedly differentiates you from your competitors. It should be the reason why customers choose to buy your products or services over others. In my experience of running a business for over 20 years, I’ve found that most companies can have the following eight types of advantages.
This is simple. Your product is simply the cheapest. People oftentimes use price alone to guide their buying decisions. If your cost is lowest among a bunch of other commoditized competitors, then you’ve got a good chance of having an edge.
Value is a customer’s perceived return on investment. Sometimes it’s a tangible, measurable result and sometimes it’s not. Some businesses can calculate the value of an investment over a period of time, while others may just say it feels right. Someone may get a cheap fast food meal but then feel a little nauseous afterward, so the value isn’t high. Other people like to pay a little more for a car because they simply like how it drives. What one customer considers value may differ from another’s point of view. Value is subjective, but it can be a significant competitive edge.
You may have a reputation as a service provider for really knowing your stuff. For instance, “That firm is a great kitchen remodeler,” or, “That guy is one of the best plumbers I know.” Your competency will set you apart, for sure. The challenge is communicating your skillsets to new customers — this is where reviews come in handy. A good reputation for competent work is earned over time, but once you have it, you’ll have a better chance of being chosen over your competitors.
Most customers really don’t care about actually being your customer. They’re buying your product or service to fulfill a need. The less interaction they have with you the better, which is why companies that deliver their wares fast and without any drama are preferred. Obviously, this isn’t every case. Sometimes, people like to linger over a long dinner or enjoy the process of watching their ice cream being scooped, but that’s generally not the norm. People want their stuff, and they want it fast. Speed of delivery, therefore, is usually a big competitive advantage.
No one wants to buy a sub-standard product. We don’t want to receive less than the highest quality service. When customers have a problem, they want someone at the help desk to be available to help solve it. When you pay for your internet service, you expect your internet service to be up and running 99.99% of the time. We want to depend on the airline to take us to our destination as planned and the plumber to show up at the appointed time. Reliability is a competitive advantage.
I live in the middle of a city, and I like sushi. There are literally five sushi restaurants within a half mile of where I live. And yet, I tend to go the one closest. The food is fine. But their location is the big attraction because, well, I’m lazy. A competitive advantage can be as simple as where your business is located. As long as I’m getting something satisfactory, I’m even willing to sacrifice some of the things like cost or reliability if it’s easier to get what I want.
7. Intellectual Property
You might have something that no one else has, and that gives you a competitive advantage too. Netflix has proprietary compression technology that has made it easier and reliable to stream movies. A car wash near me advertises its “patented simonizing” technology. OpenAI’s large language model has proprietary algorithms, which — at least initially — gives its ChatGPT chatbot a competitive advantage over other generative AI platforms. Google has a proprietary way of searching the internet. Obviously, these kinds of intellectual property are a plus, but — as most companies will tell you — it doesn’t last forever!
My company sells customer relationship management software, including Salesforce.com, which is an industry leader. People who own BMWs would never drive anything else. My wife loves to shop at DSW for shoes because she expects great and affordable products. When I go into any McDonald’s in the world, I know my Big Mac is going to be awesome. These companies have worked hard to build their brands, and because of that, they’ve established trust. People choose these products because they know what they’re going to get, and that’s a comfort. Having a great brand is a powerful competitive advantage.
And yet, even a great brand is transitory. And so are all of the other competitive advantages I’ve listed above. They’re all fleeting, and they’re all subject to change. You might have built a strong brand over the years but one incident can destroy it. Your location may be a competitive advantage until a competitor opens up across the street. You might be the low-cost provider until a competitor buys materials from a new supplier overseas and can sell their product for less. Nothing stays the same.
It’s all subjective. Why people buy something is usually beyond your control. They need an umbrella because it’s raining. They’re in the mood for a steak. They choose a red shirt because they like the color red. All you can do is put the best product or service out there again and again, day after day, and ultimately, enough people will buy. You can’t really figure out the reason.
So, how do you keep that competitive edge? My theory, as a business owner, is that you don’t worry too much about having a competitive edge! Don’t obsess over your competition. Instead, do what you say you’re going to do at a reasonable price. Act responsibly and fairly. Take enjoyment from what you’re doing, and go to work every day with the goal of making the lives of your employees and customers better. Do that long enough, and you’ll never have to worry about succeeding. There’s a shortage of businesses behaving this way.
Next steps: Want more small business tips as you work toward your entrepreneurial goals? Sign up for the Small Biz Ahead newsletter today.