Competitive advantage is an advantage that a firm has over its competitors, allowing it to generate greater sales or margins and/or retains more customers than its competition. There can be many types of competitive advantages including the firm’s cost structure, product offerings, distribution network, and customer support.
While creating a sustainable competitive advantage is not easy, the following will help ensure you get and remain ahead of the field.
1: Establish Brand Loyalty. Customers will often remain with a brand they have loyalty towards, even though the company does not offer the cheapest or most effective product. Focus on building strong relationships with your customers and delivering a great customer experience and service.
- Patent Your Product. There has been a lot of debate recently about the true value of a patent. While patents are not a ‘cure all’, they are an important weapon in an entrepreneur’s competitive advantage arsenal.
- Continually Innovate. Customers like updates and upgrades. Keeping your product fresh and compatible with the marketplace (particularly if software), is essential.
- Hire ‘Connected’ Team Members. If your market includes large companies and government departments, connections to key individuals within these organizations can dramatically accelerate your ability to meet and secure contracts. Try to have at least one member on your team who is ‘connected’.
- Installing ERP: ERP is a very expensive but a fruitful means of better controlling of the organization. The company can gain the competitive advantage by installing ERP software.
- Use Long-Term Contracts and Incentives. This step has to be executed carefully, as it can backfire. If you can establish a long-term contract with your customer, then clearly they are less likely to switch to a competitor. If you only offer long terms contracts, however, and your competitors are offering short terms contracts, then you are likely to lose business.