Differentiate your business to increase customer loyalty and earnings

Whether your business is well-established or still in startup phases, defining and leveraging competitive advantage is a powerful tool for growth and long-term stability.

Competitive advantage typically falls into three categories: ¹

1. Cost leadership: lowest pricing in the target market
2. Differentiation: unique features, benefits, or other offerings
3. Focus: specific niche, customer group, or target market

Before determining your approach to competitive advantage, conduct a competitive analysis to assess your business’s current operations in relation to your competitors. Your competitive analysis can include:

• Target market demographics and other considerations
• Competitor pricing and marketing strategies
• Your business’s pricing and marketing strategies
• Competitor market share and any relevant niche markets
• Your business’s market share and any relevant niche markets
• Missteps by competitors or strategies they may have overlooked ²

Once you’ve identified what distinguishes you from your competitors, define your value proposition. A value proposition should sum up your business’s uniqueness, target market, and specific value of your product or service to the market.³  This value proposition does not need to be a formal document, but should be documented in a place that is accessible to all employees, and frequently referenced. 

Use this value proposition to intentionally align with your target market segment. Do you address specific pain points or challenges for this customer base? Consumers may be willing to pay more for products that specifically meet their unique needs.¹ All of these differentiators should factor into your brand image and identity. The things that set your business apart should be clear to customers and potential customers in your target market segment. This value proposition should be woven into messaging and systems on a large and small scale.

For example, if you are a manufacturer whose primary competitive advantage is speed of customization, that should be highlighted on a large scale through advertising, marketing campaigns, and on your website and social media. On a smaller scale, each of your team members should be comfortable explaining your speed and how it compares to competitors, especially if there’s a higher cost associated with more responsive, faster service. 

Defining your competitive advantage is an important step to long-term business growth. It’s just as important to maintain that competitive edge over time by continuously innovating, refining your focus strategy, and optimizing the resources you have.¹ Additional strategies to maintain and strengthen your competitive advantage include:

• Demonstrating thought leadership and industry expertise – identify local organizations or events where you may be able to speak, like chambers of commerce, professional organizations, or young professional groups. You may also consider writing articles or creating educational materials. Depending on your industry, these articles and educational materials can be easily adapted into a short presentation or speech.
• Nurturing current customers – maintain your existing customer base to strengthen your market position. Identify what your best customers value and offer exclusive perks or access to features to encourage continued engagement.
• Seeking out and responding to product feedback – adapting to feedback is a powerful tool to set yourself apart from competitors. Seek feedback from current customers, former customers, and prospects and, most importantly, assess and act on that feedback when possible. Your customers and prospects have valuable insight into the experience of purchasing your product and working with your team. Take this information and use it to improve your business. 

Competitive advantage is unique to each business and is a powerful tool to increase market share if leveraged intentionally. As you work to build your business, surround yourself with advisors you can trust. Contact your local banking team to make sure your financial picture is clear as your business grows.