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Create a competitive advantage and stand out from the competition
Reading time: 9 minutes
Updated 19 February 2024

Create a competitive advantage and stand out from the competition

Creating a competitive advantage and distinguishing yourself from the competition is what allows you to stand out among many rivals in the eyes of customers.

The presence of more or less dense and fierce competition can make all the difference to the success of your new business.When you find yourself up against several competitors, developing and retaining precisely what is called a unique competitive advantage is critical to attracting new principals and clients.

Figuring out whether you have the resources to take on this adventure and identifying now what makes your business unique are just the first steps you are called upon to take. The main challenge is to be able to offer superior value and/or greater benefits than what your competition is offering.

There are many ways to accomplish this and you are about to discover them; first, however, let’s shed some light on the definition of competitive advantage and Unique Selling Proposition, also known as USP or Unique Selling Point.

 

Competitive advantage: what it is

The concept of competitive advantage, in economics, refers to a theory that describes how it is possible to beat the competition.

It was defined by Michael Porter, of Harvard University, who published a book in 1985 entitled precisely “Competitive Advantage.” According to Michael Porter, competitive advantage means “being different,” in other words, “deliberately choosing different activities to convey a set of values.”

Michael Porter specifically identified 3 possible alternative strategies (the cost leadership strategy, the differentiation strategy, and the focus strategy) and 2 different types of advantage related to them (the cost competitive advantage and the differentiation competitive advantage).

 

Porter's competitive advantage

Porter’s competitive advantage

 

Types of competitive advantage

You can gain a competitive cost advantage by selling your product or service at a lower price than that offered by competing companies. In this way, you can wrest customers away from competitors, but this strategy will not prove particularly helpful if you wish to build loyalty around your brand, because any relaunch by competitors would risk putting you in a weak position.

If you are interested in gaining a competitive cost advantage remember, in this regard, that the “race to the bottom” with competitors risks bringing you to a point where the price offered in the market is no longer affordable and sustainable for you. Not only that, low prices risk being perceived by customers as synonymous with poor quality. In any case, if you decide to go for this strategy, take care to keep your operating costs as low as possible, because only in this way can you find a satisfactory balance between costs and revenues.

There are several ways to secure a competitive differentiating advantage: you can offer a product or service that is not in the market or, for example, you can focus on that added value that really makes your offering unique, such as an excellent customer experience. Promoting the aspect that most and best sets you apart from the competition is key to managing customer relationships and making them understand why they should choose your product or service specifically.

In terms of both cost competitive advantage and differentiation competitive advantage, opting for a niche market gives you the opportunity to have greater room for maneuver (and success), since in this way you avoid going up against already established and well-established brands. Not surprisingly, Porter’s model distinguishes between broad cost advantage and niche cost advantage (which ensures higher profit margins) and between broad differentiation and niche differentiation (which gives you the opportunity to understand your audience more and better and build value and loyalty more easily).

 

Sustainable competitive advantage (and how to preserve it)

It is useful to introduce now the concept of sustainable competitive advantage: the sustainability of any competitive advantage is related to the extent to which the resources used can be imitated or substituted. Resources, in other words, must be limited, difficult to replicate and non-substitutable.

To secure a sustainable competitive advantage, your startup must use different resources and strategies from those of your competitors. To be difficult to replicate, resources and strategies may be tied to a specific time period or space, or the difficulty may lie in the interaction between elements, which may be difficult to understand and, therefore, copy. Regarding non-substitutability, the concept you need to be clear about is this: if you could replace one resource with another achieving the same result, your competitive advantage would be nullified.

 

Competitive advantage and product life cycle

There is another element you need to consider to understand what a competitive advantage is: the product life cycle. In fact, competitive advantage is inevitably linked to the stage of the product in the market in which you find yourself competing. This means that the ways through which you can succeed in gaining your competitive advantage will be different if the product or service you are proposing is in the market introduction stage or is already in the so-called “maturity” stage.

 

Competitive advantage and SWOT analysis

In operational terms, to identify your competitive advantage you need to start with SWOT analysis, that is, you need to analyze your strengths and weaknesses, as well as the opportunities and threats you might encounter in the market.

SWOT analysis, in fact, allows you to identify the resources and skills you possess and those that, on the other hand, you do not (yet) have and thus also to understand how sustainable the competitive advantage you have identified is.

 

Competitive advantage and business model

Once you have identified your startup’s competitive advantage, the next step is to draft the business model, which, among its key elements, must have precisely the enterprise value proposition. Do not underestimate this moment because reasoning about the strategy through which your startup can create value and putting your business idea in writing gives you a chance to reevaluate the soundness of your previous intuition about competitive advantage.

 

Examples of competitive advantage

The overview of competitive advantage can only be exhausted with some practical examples. A classic example of competitive cost advantage is the one achieved by Ikea through economies of scale: with its standardized furniture, the Swedish company was able to significantly reduce its production costs, thus gaining an edge over its competitors.

Examples of competitive differentiation advantage, however, include GoPro: when GoPro’s mini handheld video camera made its market debut, it quickly and decisively outperformed the competition due to its unique ability to withstand water and weather.

 

USP, unique selling proposition: what is it?

It is now time to delve into the previously only mentioned concept of Unique selling proposition.

As already pointed out, communicating clearly, simply and immediately to customers what it is that makes your product or service unique is crucial. The unique selling proposition is precisely that message that differentiates you from your competitors. In more practical terms, the USP leverages the key strengths, that is, the elements that make your brand or product or service unique and valuable to customers.

Uniqueness, as mentioned, does not necessarily refer to the product or service itself: focus on your message and worry that it is new. No competitor must have already proposed it in the market. Remember that the fact that the unique selling proposition is unique, however, is of relative importance: uniqueness, in fact, gains value only when it refers to a need or desire of your target audience.

Don’t be generic: another characteristic of the unique selling proposition is, in fact, specificity. Having a specific positioning makes your message stronger, easier to remember and defensible over time, because it is more difficult for competing companies to copy you.
Very often, we tend to confuse the Unique selling proposition with a slogan; however, the latter is only one of many ways of communicating the USP. The concept of the Unique selling proposition is, on the other hand, much broader, and you must express it not only in words but also in practice, integrating it into all areas of your business.

 

How to create the unique selling proposition

Now that you are clearer about what a unique selling proposition is (and what it is not), it remains for you to understand, in more concrete terms, how you can create one. How you differentiate your product or service depends, inevitably, on what you offer, your target market (market analysis) and the competition (competitive analysis) within it; nevertheless, however, you can refer to some broad guidelines that will make it easier for you to bring your USP to life.

First you should style a list of all the strengths of your brand and your product or service. The elements that set them apart from the competition should be very specific, that is, address a very specific need and provide a clear solution to the problem.

Monitoring and analyzing the competition, then, will allow you to understand the positioning of other brands. This will make it easier for you to find the space where you can fit in with your product or service. That space corresponds to an unmet customer need-you go looking for all the needs that your competitors have not yet been able to fill.

A point should be made here: even if you are the first to offer a particular product or service and you believe you have tapped into a new market niche with no direct competitors, you need to think very carefully about your USP. Being a “first mover,” in fact, does not mean that you have no competition (or that you won’t have any): being the first to respond to a given need or desire means having to struggle with the fact that, up to that point, your customers have managed to live without your product or service. Think carefully about this when you have to decide what to communicate and how to do it.

Putting your unique selling proposition on paper can be very useful for you: it helps you better focus your positioning statement and clarify all the elements around it, starting with your target audience.

Once you have identified the unique selling proposition that is right for you, finally, think ahead and already think about how you can integrate it into all phases of your business.

Your job does not end with the creation of the Unique selling proposition: you must, in fact, continue to keep an eye on your customers because their needs change over time, and you must ensure that your USP remains unique and valuable. Keep an eye on new entrants to your target market as well, and monitor the costs and benefits of your Unique selling proposition so that you can ensure that your profit margins are always adequate.

 

How to stand out from the competition

Now you know what is meant when it comes to competitive advantage and unique selling proposition. That’s not enough: you need to be clear about how, in practical terms, you can set yourself apart from the competition.

The initial challenge is to find something in which you are really significantly better than any possible competitor. After all, as stated by Instagram co-founder Kevin Systrom

“great products sell themselves.”

Or almost.

Work to amaze, engage and, above all, satisfy your customers 100 percent by providing the best possible shopping experience, but be careful never to compare yourself directly with your competitors-that would shift the focus to them, while your attention, and especially your customers’ attention, should be focused on you.

Pay special attention to branding: your brand must be recognizable and always consistent, that is, in line with your Unique selling proposition. Not only that: it must also always be present and highly visible. In this regard, don’t forget to also take care of the packaging of your products, an increasingly relevant aspect for customers nowadays.

Just like branding, your tone of voice must also be clear and always consistent. Be careful: tone of voice is not only about text, but also about the images you use to promote your brand.
If you are convinced that your product is superior to other players in the market, offer it in different variants. This allows you to further distinguish yourself from the competition and consolidate your strong position.

In general, while it is true that you do not have absolute control over market prices, you can have control over the experiences you can think of to surprise, engage and satisfy your customers. Aim for them because, in this way, as already pointed out, it will also be easier to defend the competitive advantage you have gained and retain customers.

The price argument is, however, more complex: if you do not have the option of reducing it further (because that would mean no profit margins), take care to justify your choice with the utmost transparency, making it clear precisely and completely where your gains are going. This, too, can secure you a good competitive advantage within your target market; the challenge, you must be clear by now, is to communicate your Unique selling proposition accurately and honestly.


Tags: Strategy

Nicola Zanetti

Founder B-PlanNow® | Startup mentor | Startup consulting & marketing strategist | Leading startup to scaleup | Private angel investor | Ecommerce Manager | Professional trainer | Book writer

info@b-plannow.com

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