Recently I’ve been working on a blog series focused on identifying your competitive advantage as a business. I’m dedicated several blogs to this topic because I believe it is an essential one for business owners to think about.
In case you’ve missed the other blogs in the series, I define competitive advantage as:
- How your product or service helps your customers.
- How your product or service is unique from other offerings available on the market.
In order for it to be a true competitive advantage, it must have both elements (valuable to your customers and unique from competition).
Why is competitive advantage important?
Why is this topic so important that I am committing multiple blogs to it? When you understand your competitive advantage as a business, you are able to promote and market your business most effectively, helping you attract more customers.
In fact, when I consult with businesses, one of the first questions I ask is, “What makes you different?” In order to effectively market your offerings, you must convince potential customers why they should choose you over one of the many other options available. That’s your competitive advantage.
Steps 1 and 2 of identifying your competitive advantage
I teach a four-step process to identifying your competitive advantage as a business. I’ve already covered two steps in prior blogs, and we’ll discuss the final two steps today. First, I’ll share a quick recap of Steps 1 and 2.
- Step 1: Identify and understand your target market. Before you get started analyzing what makes you unique, you need to deeply understand your target customer, including who they are, what they care about, and their needs and challenges. In a recent blog, I explained how to do this, including how to create a buyer profile that you would use throughout the rest of this process.
- Step 2: Connect your offerings to your customers’ needs. Once you deeply understand your target customer and what is most important to them, the next step was to make a list of all the ways your product(s) or service(s) benefitted that customer or solved a problem for them. You will use this list for the next steps discussed in this blog, so make sure to have it handy.
If you haven’t completed the first two steps, you’ll want to go back and do so before working through the final steps outlined in this blog.
Step 3 to identifying your competitive advantage
Now that we’ve reviewed what competitive advantage is, why it’s important, and the first two steps in the process, we’re ready for the final steps in identifying your competitive advantage.
Step 3 helps you narrow down that long list you compiled in Step 2, of all the ways your product or service benefits, helps or solves problems for your customer. Now you want to think about your competitors, other companies who offer similar products or services as you.
You want to cross any items off the list that a competitor offers similar to you, or that doesn’t distinguish you from a competitor in a meaningful way. If you’re not sure whether to keep something on the list or cross it off, use these indicators:
- If a competitor offers something similar, do you do it significantly better (such as much higher quality, lower cost, etc.)? If no, cross it off the list.
- If a competitor offers something similar, do customers perceive added value in your offering, based on your research? If no, cross it off the list.
- Is this something that no one else in the industry is offering, or that you are offering in a unique way? If no, cross it off the list.
In this step, you want to be ruthless in your decision making. Just because you cross something off the list doesn’t mean it isn’t an important benefit of your product or service—it just means it is not your true competitive advantage. Really try to think about your list from the position of a potential customer, and evaluate honestly if a competitor offers something similar or if you are truly unique.
Step 4: Choose your competitive advantage
It’s time for the final step! After Step 3, you should hopefully have a few items left on your list. It’s time to narrow that down to one (or maybe a couple) competitive advantage that you will use to market your company most effectively.
Of the items left on your list, you want to find the strongest benefits you offer, that your competitors don’t offer AND that customers highly value. As you work to narrow down your list, keep both those components in mind. You don’t have a competitive advantage if you do something better than a competitor but no one wants to buy it. Similarly, if you offer a product or service that clients highly value, but dozens of other companies offer the exact same thing, you aren’t differentiating yourself.
If you're looking for more guidance on this topic, check out this full-length guide on identifying your competitive advantage. Also, take a look at this buyer profile template to help you nail Step 1 of this process.