What is your Competitive Advantage?
When business is going well it’s easy to relax and get complacent. So how do you stay hungry and keep your competitive advantage? The key is to constantly evaluate why your customers are choosing your services – and why new customers would choose you over competitors.
There are many companies that didn’t anticipate the trends on the horizon and were subsequently put out of business because of it. Borders is a prime example; they were a leader in the book industry, but they missed the rise of e-books.
It may not be a seismic shift like e-books that can overturn your business or cause you to fail. It can be smaller items like poor customer service, employee turnover, or shifting consumer habits. At least every three to six months I recommend that you conduct a competitive and risk analysis of your business by reviewing a few specific areas:
Customer Share of Business
If one or more of your customers generates a disproportionate amount of your top line, you must ensure they are getting the attention they deserve. For example, do they have a special customer service channel or dedicated representative? When was the last time you spoke to them to confirm that you are satisfying their requirements? Conduct an analysis of what would happen if you lost one or more of these customers. Consider what would be the possible reasons for losing them, including what your competitors could do to take them away. Also, explore how you might diversify your customer base.
Does any one product represent a large percentage of your sales? If so, think about how that product can be improved. If the core technology or workings of the product cannot be improved, how might you repackage it so your key customers feel that you are giving them something more? Perhaps most important, is your competition working on any products that could rival your top-selling product(s)?
Have you ever experienced your own customer service? Evaluate how quickly problems are solved and if customers feel that your company appreciates them as repeat clients. Mystery shop your competitors to identify their best practices. Apply the most appropriate aspects to your service.
Whether online or offline, make sure you are tracking if customers are returning. As we have discussed in previous MasterCard articles, the cost of acquiring a new customer is far greater than the cost of retaining an existing customer. Implementing a loyalty program to increase your repeat customers can provide you with a clear competitive advantage.
Valuable employees are always a company’s most important asset. How you would be affected if one of your key employees left for a competitor? Would any customers follow them and would they take any proprietary knowledge that might help your competitor gain an advantage? Also, think about the impact the time required to hire and train a new person would have on your business.
How does your marketing compare to the competition? Follow your competitors’ social networks, sign up for their newsletter or mailing lists, review their website, and scan local marketing sources to see what material they are producing and the promotions they are running. Also, review your messaging to determine if you can improve your connection with customers.
In-Store or On-Website Experience
How do people experience your point of sale and how does that compare to your competitors? Any friction in this process can diminish your advantage in the market. Is your competitor offering mobile payments or one-click purchasing or any other tools to expand the base of customers? Also, review your customer purchasing path to determine if any roadblocks or poor experiences are leading to customer abandonment.
Brainstorm three changes in the market that could affect your business and analyze how you are prepared to address them. Look to other markets for new products or ideas that might not have yet arrived in the Caribbean but could give you a significant advantage. Think about the impact of customer habits, innovation, and the rise of mobile technology.
For each review, consider selecting a small sample of customers to survey. Ask them what you are doing well and what you could improve upon. Also, ask them about any new products or features they may purchase in the near-term. Hearing from your customers may trigger ideas that you might never have considered and identifies risks that could result in a loss of business. You do not have to implement all of their suggestions, but it is important to remain close to your customer so you can learn what’s top of mind for them.
Once you have the answer to each area of the competitive review, list your strengths, weaknesses, and risks. Then evaluate what needs to be done to solidify your strengths and to limit your exposure. For example, if losing a key employee is a risk, consider implementing a non-compete clause; also, ensure the employee gives an appropriate amount of notice and that you have developed an ascension plan for each position once their replacement is identified and ready to begin.
Each of your risks do not necessarily require you to act, but they do require you to be aware of them. For example, if your competitors are trying new marketing channels such as Facebook Local Ads you should consider trying the channel. It’s important to understand the advantages and disadvantages of the ads so that your competition is not leveraging a channel about which you knew nothing, and in turn, to which you were unable to react.
Change in business can occur very quickly. Constantly evaluating your competitive advantage is about understanding each component of your business and how each would be affected by changes in the marketplace.