Why should a consumer spend their money at my business rather than at another? How does my product separate me from my competitors? What is it about my restaurant that is distinguishable from others in this market?
If you’re asking yourself these questions, that’s good. It means you’re searching for your competitive advantage, a key factor to improving your sales and growing your business.
But, identifying your business’ competitive advantage is an arduous journey, one that must be undertaken with tact and a clear plan. Otherwise, you will find yourself lost in a sea of information with no direction towards the shore.
The Small Business Administration (SBA) has a simple equation that business owners should use to identify their competitive advantage: Market Research + Competitive Analysis = Competitive Advantage.
Seems easy enough, right? It’s certainly not difficult, but this equation needs to be worked through carefully in order to derive the right results.
SBA recommends focusing your market research by answering six basic questions:
- Is there a desire for your product or service?
- How many people would be interested in your offering?
- What is the income range and employment rate?
- Where do your customers live and where can your business reach?
- How many similar options are already available to consumers?
- What do potential customers pay for these alternatives?
These questions can be answered by utilizing either popular internet search engines, or the old fashioned way—putting boots to pavement and asking your customers yourself. This should give you a solid overview of your market to work with.
Next, you’ll need to analyze aspects of your own business that distinguish it from your competitors. Those include your market share, any barriers to market entry, the importance of your target market to your competitors, etc. Be sure to factor in each industry your competitors work in as well. That means if you plan to merchandise a product, you may end up competing with large-scale manufacturing businesses.
Your competitive advantage should fall into one of five categories: Added Value, Innovative Ideas, Intellectual Property, Location, or Obsession. If your answer to the above equation doesn’t fit into one or more of these categories, you need to go back to the drawing board until it does.
Utilizing Your Competitive Advantage
After working through this equation, you should have a general idea of what your competitive advantage is. The next step is utilizing it in order to grow your business.
Once your competitive advantage is nailed down, it needs to be the focus of your marketing, public relations, and relationship between your customers and your employees.
If you’re competitive advantage is a superstar chef, everyone in your community needs to know about it. Shout it from the rooftops during slow hours if you have to. Your employees should also sell new dishes as “Chef X’s new creation”.
Utilizing these strategies will help you identify how to attract new customers, retain old ones, and create staying power in your local market.