Continuing our series on “Back to Marketing Basics” today we’ll discuss sustainable competitive advantage. First. let’s define competitive advantage. According to Wikipedia:
Competitive advantage occurs when an organization acquires or develops an attribute or combination of attributes that allows it to outperform its competitors. These attributes can include access to natural resources, such as high grade ores or inexpensive power, or access to highly trained and skilled personnel human resources. New technologies such as robotics and information technology can provide competitive advantage, whether as a part of the product itself, as an advantage to the making of the product, or as a competitive aid in the business process (for example, better identification and understanding of customers).
The term competitive advantage originated with Michael Porter and recognizes that a firm’s competitive advantage helps ensure the success of the firm.
Sustainable competitive advantage simply means it’s hard for your competitors to copy the tactics that give you competitive advantage. That’s why price often isn’t a good tool to build your brand around — it’s way too easy (and fast) for competitors to copy your price. Unless you can somehow afford to sell your brand for much less than your competitors, using price as your main tool for gaining competitive advantage only results in a price war that strains the coffers of all competing firms. Not a great strategy!
Sustainable competitive advantage
Obviously, the first step in creating sustainable competitive advantage is to scan the environment — called an environmental scan or a situation analysis — to see what’s going on around your brand. What does your target market value? What are competitors doing? How’s the economy?
Next, you need to look internally to see what you’re good at. Sure, with time you can create sustainable competitive advantage around anything, but, in the short run, you need to focus competitive advantage around things you already do well, skills you already possess, resources you already have.
9 options for creating sustainable competitive advantage
1. Superior product quality
When consumers talk about quality they don’t mean the same things as when engineers talk about quality. To engineers, quality reflects how breakable the product is or how long it lasts. Certainly, these are concerns for consumers. But, consumers also look to ease of use, ease of cleaning, ease of set-up, features, etc. in their evaluations of quality.
Apple historically did a great job when it came to consumer quality scores — recent missteps with the iPhone5 may cloud this image a little. That’s why Apple products command such a premium price in the marketplace.
2. Superior customer service
Service can’t just be something you do sometimes or left to chance. For most businesses, service quality can make or break the business. I think Nordstrom’s is an excellent example of superior customer service. A colleague told the story of going in to Nordstroms with a button missing from his suit jacket. The customer service person insisted the customer remove his jacket and allow the tailor to sew on a new button. That’s customer service!
3. Unique products
Patents assure companies exclusive rights to a product or technology for 17 years. If the innovation is desirable, sustainable competitive advantage creates huge ROI for the firm. And, some firms, like Intel, thrive on innovation. Intel CEO contends that 90% of profits come from products that didn’t even exist a year ago. Cool.
4. Supply chain relationships
Efficient supply chains allow firms to deliver the right product at the right price at the right time. And, that’s hard to compete with.
Dell is a good example. In the early days, Dell took surplus parts, combined them to the custom specifications of their buyers, and delivered via a supply chain that eliminated the need for Dell to store a lot of inventory. Right product — right price, since the components were surplus — right time, as components were combined in transit to speed them to the buyer’s door.
5. Efficient processes
Getting things done in an organization can get bogged down in bureaucracy and needless steps that slow the organization down and add a lot of cost. Being nimble and having processes that allow things to get done creates huge sustainable competitive advantage.
LL Bean is a good example. Their order fulfillment process is like a symphony conducted by a Maestro. It’s a thing of beauty to watch all that product moving seamlessly through the warehouse will minimal mistakes.
6. Loyal customers
It’s easy to understand how loyal customers provide sustainable competitive advantage. When customer clamor for your product, you know you’ve created loyal customers.
Coke is a good example. Remember when a change in formula caused folks to hoard cases of the product and protest in the streets to bring back old Coke. Cool!
7. Location, location, location
We all know how important location is — even in the days when many retailers are as close as your laptop or iPad. Think Starbucks. They’re everywhere you want coffee — with a nice, comfy place where you can kick off your heels, boot up your laptop, and relax.
8. Attract and keep great people
People are really the heart and soul of the organization. Treat them that way and you’ll attract the best and brightest who’ll work hard and smart for your success. People are probably the most critical element in creating sustainable competitive advantage.
Here, let’s talk about Google. Google is a great company that’s built a community for its employees. People love working there and Google benefits greatly from their efforts.
WOW, this single word — reputation — encompasses a lot. And reputation means a lot when creating sustainable competitive advantage.
MarketWatch finds Amazon has the best business reputation around. And, I think many of us can attest to that. We all love those little boxed showing up regularly on our doorsteps.
Learn more about creating sustainable competitive advantage
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