What advantages do you have over your competitors?

Published on March 30, 2012 What advantages do you have over your competitors?

Starting up a new online shop is relatively easy, so how do you protect your business from being copied or overtaken by better funded competitors? How do you compete with global giants whose annual marketing budgets are greater than your entire income? How do you evaluate your sources of competitive advantage?

If you want to be truly successful with your online business, it’s definitely worth taking some time up front to do some strategic planning, and understand your sources of business advantage relative to your current and future competitors. There are a number of tools that you can use to do this.

How to compete against bigger and better funded competitors?

One important key to success when you’re in your own David v Goliath battle is to consider just a small part of the market that either your current competitors don’t cover, a part that they do cover but not that well, or a part they would not be interested in (because it’s too much hassle to compete there compared to other more lucrative market segments). Their weaknesses can be your gain. Deciding on a market niche, gives you an immediate competitive advantage – something you can do that they can’t or won’t.

Co-incidentally, this is the same strategy that you can follow when looking for pay-per-click keywords to advertise on: it’s never a good idea to compete head-to-head on one word costly keywords when you can be just as effective with less expensive items that have better value-for-money.

Evaluating a competitor’s strengths and weaknesses

In deciding where your source of competitive advantage lies, start by understanding all of the customers in the market. Try to write a list of all the different types of customers that buy the products and services you are thinking of selling. Group customers based on types so you have just a few different customer types of segments and write down what their motivation for buying that product online will be. You might have people who buy the product every day because they need it for their job or because they consider it a necessity, and others that buy the product occasionally as a luxury. Some might buy online convenience, some might buy online because they already have the product and are searching online for the lowest price, others might buy the product as a complement to something else.

Once you understand the market a bit better, try thinking about which of these customer segments is the one you want to target and then for your chosen group(s) write down the competitors you can think of that directly sell to those groups.

Next, so that you can understand the competitor’s strengths and weaknesses, first take a look at your own business. What resources do you have? A resource is something that is hard to duplicate or substitute, and something that is able to create value for other people (i.e. improve upon or make something more than what you started with). A trademark for example can’t be duplicated and gives you ten years of protection backdated to the date you applied.

Once you understand your own resources, take each competitor for the customer groups you’ve defined, and make a list of your strengths and weaknesses when selling to that particular group. At this stage only consider internal factors that you can control by the way you run your business. Weaknesses of your competitors might include:

• Lack of understanding of a particular customer group
• Complaints about a particular competitor by a particular customer group (most groups might love the product/brand but a group of customers may have been treated badly or hate one of your competitors. You may have the strength of being able to address that segment better than the competitors). Research each of the competitors by looking up forum posts or blog posts about that competitor. Don’t look for one off complaints, look for trends. Everyone will have one-off complaints if you look hard enough, but that won’t be enough for you to gain a competitive advantage. A competitive advantage is where you have a long term advantage over that competitor and they can’t just fix the problem and overtake you again.

Next, look at industry factors

Next, to determine your overall source of advantage relative to your competitors, consider the factors that impact on the industry that you are selling in:

• What could stop a competitor from starting up an identical business to yours? Do customers buy based on brand or on product in your industry? How are they buying from the existing competitors in the industry (consider this for each of the customer groups defined)?
• How many competitors are competing for each of the customer groups? Is there a customer group that’s not well serviced, or that you understand better than competitors (when looking at your list above)?
• How loyal are customers in the industry? Will they buy from anyone who they can get the product from? Do they buy on quality or price?
• How much information do customers need to buy from anyone? What level of information would they seek before buying from someone new? Is there a way of explaining your products and services that would address
• How much do customers trust the existing competitors?
• Who are the main industry suppliers for the products? Can you get access to similar or better suppliers at a good price? This is often a key factor in the success of an online business. Access to suppliers can heavily influence the degree of competition in the market. Is there a new supplier who has a product advantage and you can do an exclusive deal with? How easy would it be for the existing competitors to switch to that supplier? (consider time and pain of switching and not just the cost – would it be worth that competitor changing their strategy? If they have a long term contract with another supplier they probably wouldn’t bother unless the advantage was significant)
• What pressure groups influence what is likely to happen in your industry moving forward? What new things are coming in the industry that could affect the competitive landscape – consider government factors, environmental factors like the Carbon Tax coming from July this year, Social factors like new social media and existing social networking, and technological changes.
• Can those products and services be substituted? Could you stock the originals and the substitutes?
• How are products delivered to customers? Is there a delivery advantage that you have now that could be exploited in the future? Do you have a clever way of getting items to end customers that nobody else has thought of?
• How competitive is the advertising and marketing landscape currently? Is there a way to level the playing field through search marketing and social networking compared to traditional forms of advertising?

Understanding exactly where you have an advantage over competitors and for what customer groups will help you determine your marketing strategy, which is just as important to determine as to who you will use to provide the shopping cart for your website.