Creating Competitive Advantage

Competitive Advantage is what separates you from the rest of the herd. It’s what keeps your business alive and growing. In short, it’s the reason you are in business. Yet the biggest marketing flaw in most companies is their failure to fully reap the benefits of their competitive advantages. Either they think they have a competitive advantage but don’t. Or they have one and don’t even realize it. Or they know they have a strong competitive advantage but fail to promote it adequately to their customers and prospects.

In my research with middle-market companies, I found only two CEO’s out of 1000, who could clearly name their companies competitive advantages. The other 99.8 percent could offer only vague, imprecise generalities. These same CEO’s often rely on outside consultants to guide strategic planning sessions. Yet, in my experience, very few consultant– even seasoned ones — give competitive advantage evaluations more than a superficial glance. Why? I wonder. And no matter the size of your company, or the kind of business you are in, your competitive advantages should be the foundation of all your strategic and operational decisions. Ignoring them can be an expensive and even fatal mistake. After all, they’re the reason customers choose to buy from you instead of the other guy. Without this edge, you will…

David Mamet’s brilliant play Glengarry, Glen Ross is all about salesmen closing deals. If you’ve seen the film version, you’ll recall that Alec Baldwin played the ruthless, foul-mouthed sales manager who berates, mocks, and threatens to fire his sales staff for failing to close on land deals in Arizona and Florida. He stages a contest that awards a brand new Cadillac to the salesman who closes the most deals in the next few days. Second place is a set of steak knives. The other salesmen face getting pink slips.

The salesmen are good–very good.  Jack Lemmon’s character in the film could charm the devil himself. But after all the schmooze, hype, sizzle and pressure, the veteran salesmen are still unable to close deals. Why? Because they say very little about the land they are selling, only that the customer has to act right now to take advantage of a once-in-a-lifetime opportunity.

Instead, they scheme to get their hands on a fresh list of sales leads. They are going for what I call the shotgun approach– shoot enough bullets and you’re bound to hit something. The more leads, the better the odds.

It’s Up to You to Show Them How

I occasionally coach small and medium-size companies that have had a hard time winning big clients who often won’t give them the time of day. Whatever the cause -corporate arrogance, lethargy, bureaucracy, or plain old habit – it is often difficult for a small business owner to get the attention of a large corporation. How can smaller companies compete against larger, established suppliers?  How can they sell their goods and services to large businesses when they don’t have any visibility?

For many years, McGraw-Hill, the big publishing company, ran a corporate ad that has become an industry classic.  It pictures a grumpy old CEO peering over his desk at a nervous young man who has come on a sales call.   The crusty CEO says, “I don’t know you, I don’t know your products, I don’t know your company.   Now what was it you wanted to talk to me about?”

McGraw-Hill’s point was hardly subtle: Your salespeople will never get beyond the receptionist unless you increase your visibility by advertising in its business magazine. Subscribers to McGraw-Hill’s publications are your potential customers, and advertising will get their attention.

There is no denying the value of advertising.  But smaller companies lack the ad budgets to build extensive branding and awareness.  Let’s say you have a few specific sales targets in mind, where advertising isn’t appropriate. If you are after a few big fish, and need the right bait, try money. No matter how indifferent the corporate whales may seem, if you can save them money, they’ll be interested – provided you can prove it. If you can, you have one dynamite competitive advantage in your bait bucket.

Though spoken well before my time, baseball legend Satchel Paige’s famous line, “don’t look back, someone may be gaining on you,” lives on. Good advice for an aging baseball pitcher, but it won’t help someone running a business. The better your business is, the more competitors you are likely to have. Succeed and they will come, and you can’t afford to ignore them. That’s why it pays to stay up to speed on your competitive advantages. They are your armor and your weapons.  It makes no sense to wait for your competitors to start chipping away at your business before you make the most of them. You may be too late.

Clients often approach me after they have lost business to their competitors – which is hardly the best time to identify, research, and broadcast your competitive advantages to your customers. The entire process usually takes several months (although my clients and I have done it a lot faster in emergency cases).

In my experience, most business owners and managers threatened by the competition have the same look about them: one not of depression or defeat, but of determination to fight. That’s a healthy response, but why get yourself in such a pickle in the first place? The result of a dogfight with a major competitor or competitors is all too often a price war, a battle usually won by the guy with the deepest pockets. You have to provide your customers with more than the lowest price. And the sooner you can identify and promote your competitive advantages – or develop and implement new ones –  the better you’ll be positioned to fend off competitors.

For most companies, large or small, a competitive advantage is rarely unique and not often sustainable over an extended period of time. But smart companies remain on the alert for new competitive advantages to develop and promote.  They spend a lot of time on customer research.   They pay attention to the competition and develop strong competitive intelligence. They may even take over a competitor with a strong competitive advantage or hire away the people responsible for developing it.

Good companies are also built on solid footings. They have all the strength they need to compete: quality, knowledgeable people, and good customer service, to name a few. But a strength is not a competitive advantage; remember, you need strengths just to be in business at all. There is nothing unique or even note-worthy about characteristics such as trust, responsiveness and longevity. Rarely will they ever close a sale.

Strengths are important, of course, but they are not differentiators. Yet in their eagerness to draw attention to themselves, companies will often brag about assets that are commonplace and trite. Consider your company’s “rich history and tradition,” for example. If your company has been family-owned and operated for 150 years, who cares?  Does the average Bud drinker care that August Busch III is running the company, and his son is the heir apparent? Bud’s manufacturing, marketing, and distribution are its competitive advantages, not the Busch bloodline.

Seize the High Ground First
SOMETIMES A COMPETITIVE ADVANTAGE IS NOT REALLY A COMPETITIVE ADVANTAGE AT ALL – but can pass for one. Let’s say that 95 percent of your business comes from referrals. Maybe some competitors can say the same thing too, but don’t. So you make the claim first, and make it loudly. By the time the competitors make that same claim, if they do at all, they will be playing catch-up.
I call this tactic, which I’ve touched upon briefly in earlier chapters, “competitive positioning.” You really don’t have a competitive advantage, but your customer thinks you do because you are making a valid claim that your competitors have yet to beat.
The interior designer introduced earlier in the book stresses to his clients that he uses computer-aided design, which will save them up to 10 days of construction time. Most designers now use the same technology, but most assume that their customers know what it enables. My client doesn’t make such assumptions. He explains how it saves his customers time, and how the technology allows for last-minute changes to be made. By competitively positioning a “strength,” he’s better able to close deals. Never assume your customers know how the technology or processes you offer helps them in the transaction. More often than not, they don’t know as much as they should.

The Gap between What You Assume About Your Customers and What They Really Think

The research I’ve conducted for my clients has shown time and again that when they assumed too much about their customers, they usually missed the sales target.

The only perceptions that matter are those of your customers. Yet companies often design their marketing, advertising and sales messages from a purely managerial perspective. They fail to do their homework about what really matters to their customers, and they fail to verify their findings with them. Even if you and your management team can identify what appears to be clear competitive advantages, if you fail to verify them with your customers – or worse, fail to deliver on them – you could be making a major blunder.  I call it “dangerous disparity.”

There are many ways to cause this disconnect with your customers:

• You use imprecise, vague language that customers don’t notice, believe, or understand.
• You claim a competitive advantage that you do not consistently deliver.
• You stress advantages that are not all that important to your customers.
• You fail to stress specific advantages for each of your target markets individually.

Yes, your customers’ perceptions could be wrong. But it’s up to you to correct them.  One of my clients thought he provided good customer service, quality and delivery. But when we did the research and asked customers to identify his company’s disadvantages, they rattled off customer service, quality and delivery as one, two and three. The frustrating thing was that my client’s service, quality and delivery were measurably better than those of his competitors. But customers thought otherwise, perhaps because these words have been so overused that they have lost any real meaning. Competitive advantages have to mean something positive to customers. They must play an important role in their buying decisions.  They must be quantifiable, and tied to the customers bottom line. Above all, they have to be true.

The Devil Is in the Details

Your competitive advantage may lie in the product or service you provide, if it is clearly superior to the competition. If so, you’re lucky.  But chances are that is not the case.  Too many companies spend too much time and money trying to convince customers that their products or services are really “better” than the other guys’, when they really aren’t. For too long, Miller Brewing Co.’s slogan for its Lite beer was “taste great, less filling.” But to beer drinkers, Coors Light and Bud Light and Amstel Light and other light-beer brands also “taste great” and are “less filling.” Miller was promoting light beer–not Lite beer.

Customers want to know in concrete terms what it is about your product or service that is better than the rest. Consider my client Southeastern Printing, the lithographic printing company offers complete electronic pre-press services, sophisticated computer-to-plate systems, and today’s most advanced Heidelberg presses.

Printing might seem to be as close to a commodity business as you can get. Customers expect that their printing jobs will be finished accurately and on time.  In fact, they insist on it.  Like the passengers on Southwest Airlines, what’s most important to them is getting the job done right and on time.

But “stuff” happens. Sometimes printers foul up, sometimes customers cause problems that result in delays.  At our workshop session on competitive advantages, I asked SEP managers what the company does to assure printing accuracy and job completion by deadline. They told me that they had a 10-point quality check for all print jobs.  It was developed over the years to make sure SEP avoided critical mistakes. I got the impression this ten-point quality check was as important to SEP as a pilot’s checklist before taking off.

You may find that your company really doesn’t have any eye-popping competitive advantages.  If so, I’ll show you how to create some. Creating competitive advantages can not only save your company; doing so could turn around your business and give it new focus for years to come. Warning: you might have to make some expensive and time-consuming changes in the way you are conducting your business. On the other hand, you may be able to create some competitive advantages without investing anything but a little sweat equity. Whatever they are, competitive advantages don’t come out of the blue; they are the result of conscious strategic decisions and operational changes based on competitive analysis and customer research. But no one ever said that running a business was easy. (After all, the key word is running. If you stand still, you’ll get run over by the guys behind you.)

I’ve worked with some CEOs who were quick to see the need for their companies to develop competitive advantages, but after identifying what had to be done, they failed to follow through.

It breaks my heart to see enthusiasm morph into lethargy as weeks turn into months and years with nothing done, as ideas and strategies die on the vine.  In one case, a marketing director resigned just as customer research was about to commence. The new director was reluctant to follow through until he had tried out a few marketing ideas of his own. Months went by, the research was never conducted, the new marketing director left, and the project remains in limbo.

If you are a CEO, business owner, or senior executive you have to make it clear to all your employees that you are committed to developing competitive advantages and will stay committed.  Identifying your competitive advantage is not a one-time exercise.

Once you have come up with your list of competitive advantages, and have vetted them with your customers, it’s time to get the word out.  You have to communicate them to your sales staff, other employees and your existing as well as potential customers.

There are three basic ways of attracting and holding customers. First is through brand awareness.  The aim is to condition customers to instinctively buy your product or service because they identify your brand with the product or service you provide. The main vehicle for building a brand is, of course, advertising.  There is no disputing the value of brand names, from Coca-Cola and Crest to Microsoft and Intel to H&R Block and Fidelity Investments. Large companies spend millions to advertise and promote their brands and keep them on everyone’s mind. They know that customers will choose a familiar name over Brand X. Smaller companies cannot afford that kind of advertising. But that doesn’t mean Goliath will always beat David. Keep in mind that no matter how entertaining or catchy the ads, they don’t win you customers. You might remember last year’s clever Super Bowl ads, but can you name the products they were promoting? Buyers can and do change their buying habits when given good reasons for switching to a competitor’s products and services.