Developing a competitive edge is vital to survival as a startup. When you are a new business, it’s sink or swim. Companies without an advantage over competitors will not survive. But how can you give your startup a competitive edge, and what will you gain?
In this article I will discuss ways you can give your business the necessary lead to be dominant in any market.
There are three types of competitive advantage. These are cost advantage, product / service differentiation, and niche strategy. As a startup trying to navigate a world full of huge multinationals, sometimes the only weapon in your arsenal is that special competitive edge.
Cost
A business builds a competitive advantage by providing better overall value to customers than competitors are able to. Not only does this help you financially, the ability to demonstrate low cost is also a goldmine for your marketing team.
Just look at supermarkets, for example. Tesco was previously the king of the budget shop in the UK, frequently touting themselves as the cheapest around. The arrival of supermarkets like Lidl and Aldi has caused Tesco to suffer an identity crisis. Now its marketing firepower has fizzled out. Last year, this resulted in it sales falling by 1.6% and its market share reducing by 0.4%, the most of the “big four” supermarkets.
If your business has the lowest operating costs of any firm in the industry, then it has what’s called cost leadership. The reason why large firms benefit from this is due to economies of scale. Companies like Unilever and Procter & Gamble are so large that they have lower costs as a result. They have lower transport costs when multiple products are distributed to the same retailer and have the same advantage again because they buy raw materials in huge bulk.
Product / service differentiation
However, having a cost advantage over large businesses is not common for a startup. That isn’t as big a problem as you might think. It’s more likely that you are offering something new, or that your product or service stands out from the crowd.
For example, cosmetics company LUSH, founded by Mark Constantine, used handmade products and sourced ethical ingredients when many similar companies have been criticised for using animal testing in the past. By imbuing their brand with a social cause, they made themselves unique.
Another example is Nisbets, a UK-based catering supplies company founded by Andrew Nisbet. They managed to steal a lead on many of their competitors by focusing on what its customers wanted: in this instance being one of the first to offer same-day delivery. If you identify what the customer wants – and give it to them.
The key to product / service differentiation as a competitive edge is knowing what your customers want. Being able to see a gap in the market, as well as fill that gap, is key to the success of any startup.
Niche strategies
So it’s clear small businesses find it more attractive to win in the competitive battlefield with something other than low costs. It is much easier to make a profit with higher prices. While you may choose to differentiate your products, another method is niche strategy.
A niche competitive advantage seeks to target and reach a single segment of the market. This is sometimes called single market strategy. Segments of the market can be broken down in a multitude of different ways, such as geographically or demographically.
This allows you to create laser-focused advertising. Your ads will be able to hit the mark more often, converting valuable leads. If your communication to consumers is crystal clear, this will set your brand apart. Companies targeting huge portions of the population can’t connect with every potential customer. When you know exactly who your customers are, you can create content that really resonates with them.
Sticking Power
Whether its low costs, unique products or targeting a segment of the market that no else does, competitive advantage is vital to your success as a startup. Not only is it marketing dynamite, it’s the kind of label that’s hard to get rid of.
Companies that have a significant advantage over others become known for it. Ever since Apple released the iPhone, they have become synonymous with the cutting edge of mobile tech. Adobe too have become a mainstay in the software industry because they understand the creative mind and differentiated themselves with a suite of products tailor-made for their audience.
You shouldn’t only consider marketing benefits either. This advantage will ensure you to stick around in the literal sense too. If you continue to hone your competitive edge, you will continue to reap the rewards. No company starts out on top. A long-term, sustainable competitive advantage is something most CEOs only dream of. If you develop a way to get a leg up over your rivals, then you must take advantage of it – or someone else will.
