Tag Archives: price

What is Your Competitive Advantage?

Every business has a competitive advantage – something that business does better, or tries to do better – than its competitors.  Knowing what your competitive advantage is will drive your marketing and advertising efforts and give you actions an advantageous clarity.  A framework I find helpful for thinking about competitive advantage is to divide those advantages into three general categories: Price, Service, and Quality.  Whether you know it or not, you are competing by seeking competitive advantage in at least one, and perhaps two, of those areas.  You can’t be competitive in all three, and you shouldn’t try to be.

Your particular competitive advantage should influence your marketing and advertising.  Cadillac competes with Kia on Quality, and Kia competes with Cadillac on Price.  A Cadillac commercial touting its low prices would miss the mark, as would a Kia commercial comparing its quality favorably with a Cadillac.  Between Cadillac and Mercedes – who both compete primarily on Quality – there may be a competition on Service.  If I owned a Mercedes dealership and I was competing for a sale with the local Cadillac dealer, I would emphasize my service as being better than theirs.  Price is unlikely to be a primary factor for someone choosing between two premium brands.

I was in Publix the other day and saw an advertisement inside the store that struck a wrong chord with me.  It was a standing poster that touted “Wal-Mart Doesn’t Always Have the Lowest Prices”, and compared a list of products where Publix purported to be less expensive that Wal-Mart.  This, to me, was a good example not knowing what your competitive advantage is.  Publix is the place where “it is a pleasure to shop”.  The store is nicely laid out, bright and sparkling clean.  The workers are friendly and helpful.   I see the General Manager and he says hello to me almost every time I am there.  The lines are kept short and move quickly.  Service is Publix’s competitive advantage.

Wal-Mart is the low price leader.  Even if Publix can beat Wal-Mart’s pricing on a few targeted items on any given day, overall your grocery bill will be lower at Wal-Mart.  But shopping at Wal-Mart is not, in my experience, a “pleasure”.  I shop at Wal-Mart from time to time, but the long check-out lines and lack of workers who can help me makes it a very different experience than shopping at my Publix.  A Publix ad touting low prices compared to Wal-Mart is a clangy as a Wal-Mart ad saying ”Publix doesn’t always have the shortest check-out lines”, with a picture of a short line at one Wal-Mart check out stand from 3:30 AM on a Tuesday.[1]  Emphasize your competitive advantage.  A picture of a fifteen person deep line at Wal-Mart saying “Aren’t you glad you’re not there?” would have been a more effective comparison for Publix.

A business can compete on different planes with different competitors.  A small law firm that concentrates on business law may compete with other small firms on Quality – we know business, and they are generalists, come to us for your business needs – but may compete with large law firms on Price or Service – we are good at business law too, but our prices are much more affordable for small companies, and we can turn your work around more quickly, or, with us, you can get a partner on the phone immediately, you are not going to be sloughed off to an associate.

For retail entrepreneurs competing with large companies, you are usually not competing on Price, and often not on Quality, if you are reselling the same items.  My friend John Emery, who I have mentioned before, runs a game store.  He sells the same games his customers can buy on the Internet, or sometimes at Wal-Mart, Barnes and Noble or Toys-R-Us.  He cannot compete on Quality – the items are identical.  He often cannot compete on Price either – MSRP is MSRP, and where there is a discount to the retailer for volume, he can’t buy the volume a big box can.  John Emery has to compete on Service.  The good news is, he knows it.  He or one of his two co-owners are in the store most of the time, and they know games.  The employees are carefully selected, well-trained, and the emphasis is on customer service.  Want to know what a game might be like before you buy – good luck getting that information at Wal-Mart.  But John and his staff can tell you.  They can recommend games based on what you already enjoy.  They will break a game open for you and teach it to you.  They have tables in the back where you can sit and play for free.  If they don’t have it in the store, they will try to find it and order it for you.  They are competing on Service and they know it – and that is why they have been in business for 28 years.

As a small business owner or a small practice professional, it is critical to know what your competitive advantage is, and to gear not only your advertising and marketing but also your business culture around that advantage.  Knowing your competitive advantage allows gives you a yardstick to measure everything by, and will help you to act intentionally to make your business a success.

[1] This is obviously a hypothetical.  Check out lines at Wal-Mart are long even at 3:30AM on Tuesdays.