Before investing in a business, one of the most important things to identify is your competitive advantage. Answer the question “why would customers choose your product/service over competitor offerings?” What makes you stand out from the competition? I’ve found that not enough thought goes into what a company’s real competitive advantage is and many companies are actually operating without one.
Think about your business. What is your competitive advantage? To determine the answer you first need to identify your target market, your competition and yourself. Â The following provides a list of questions to help get you started.
Target Market: Its important to understand your market and how you plan to approach customers. Ask yourself the following.
- What market segment are you targeting and why?
- Who are your customers and why would they choose your product/service?
- What are your customer demographics?
- Where are your customers located?
- What are your customer purchasing habits and buying trends?
- What customer needs are being fulfilled by your business? What are your customer needs?
- How often do customers purchase your product/service (daily, weekly, monthly, etc.)?
- What marketing tools will you need to advertise to these customers?
Competition: Understanding your competition is key. Learn from their mistakes, what they do well and how you can differentiate yourself from them. List companies trying to do the same things as you and identify the following about your competitors.
- What is their business model?
- Who are their customers?
- What are their strengths and weaknesses?
- How strong is their brand?
- How well are they performing? (profit margins, revenues, expenses, etc.)
- Would you purchase their product/service? Why or why not?
- What is their competitive advantage?
- What competitor would you model yourself after and why?
Yourself: You need to understand your own business offerings and the things that make your company unique. Answer the following.
- What are your strengths and weaknesses?
- What is your business model?
- What are your company goals and objectives?
- What product/service are you offering and why?
- What makes your product/service different?
- Why do you think you can compete successfully?
These questions will help you determine your competitive advantage or whether you need to rethink your business model. Often, you realize that the things you thought were unique to your company are not really unique. The most common things we hear are “my company offers the best service, our prices are the lowest, or our quality is superior.” But how can every company truly claim this? A lot of businesses think they have a competitive advantage but can’t support it after some research. Take a closer look at your business and answer the questions above. You might just be competing head-to-head with your competition without a real strategy.
Next week we’ll take a look at how West Jet established a competitive advantage in the airline industry.