As a business advisor, I routinely ask my clients “What sets you apart from your competition?” and “What is your competitive advantage?” I frequently receive the answer “I charge less than my competition.” That always
raises red flags for me, and I worry about this business owner getting thinner
and thinner margins and needing to get ready to post the “going out of business” sign.
raises red flags for me, and I worry about this business owner getting thinner
and thinner margins and needing to get ready to post the “going out of business” sign.
Gone are the days of the company store. Even in a small town, all businesses are in a global market with hundreds if not thousands of competitors. With so much competition, there are only two ways for businesses to compete: price and differentiation. Small businesses cannot compete on price with the large box stores, larger department stores or the Internet. The only way for small business to compete is on differentiation.
So what does that mean exactly? Product differentiation can be as simple as creative packaging or as elaborate as incorporating new functional features in a product. Sometimes differentiation does not involve changing the product at all, but instead it’s about creating a new advertising campaign or other sales promotions to highlight differences between one provider and another.
Differentiation strives to make a product or service more attractive by contrasting its unique qualities with other competing products. Successful product differentiation creates a competitive advantage for the seller as customers view these products as unique or superior. And that’s what the business owner wants the customer to focus on, not the price.
What sets you apart from everyone else? Here are some examples that may apply to you: proprietary know-how, intellectual property, your reputation and your brand’s equity, your high level of customer service, your convenient location, a speedy turn-around time, etc. And this is only a small sample.
Take some time to determine what your point of differentiation is and then build a marketing campaign around it. And for goodness sakes, stop talking about how your prices compare to everyone else’s.
Marcia Bagnall is Director of the Chemeketa Small Business Development Center and instructor of Small Business Management Program. The Small-Business Adviser column is produced by the center and appears each
