This is an update to a post I made back in January 2014 – over eight years ago! We haven’t had much inflation in the last eight years, but things changed quickly, didn’t they?
Much has been written on the subject of competitive advantage. What is competitive advantage? In plain speak, it’s the unique characteristics of your company that create extraordinary customer goodwill and keep your customers coming back. Competitive advantage has always been important, but with consumers being more empowered through the Internet, aggressive competition, and prices rising quickly – it’s more important than ever.
In 2022, we are seeing inflation the likes of which we haven’t seen in decades. We all know they “whys” – easy Fed money, government COVID “stimmies,” Ukrainian war, etc. As raw material, labor and borrowing costs increase, many companies have to do one of two things: 1) raise prices in an effort to maintain sales and profits, or 2) reduce prices to compete for shrinking customer dollars. If you are a premium quality provider, option 2) isn’t great since it can draw you into a pricing death spiral with companies that have commoditized themselves.
Will you be able to maintain prices and stay competitive?
Better yet, what if you could raise prices and gain market share at the same time? What does your company offer that is truly unique and hard for your competitors to replicate? If you haven’t recently, maybe it’s time to re-examine what makes you different.
This might not be as easy as it sounds. When I hear execs talk about their differentiators, it’s fairly common to hear things like:
“We have great quality!”
“We have the best customer service.”
“Our people make the difference.”
Hearing these “differentiators” is like hearing the latest business buzzwords – blah, blah, blah. These alleged differentiators are just tickets to the dance.
“What really makes you different?”
It’s time to peel away the layers and ask yourself what makes your customers do business with you – and come back time and time again. You might even ask some of your good customers and see what they have to say. You might be surprised at what you learn.
For example, you might learn that your real differentiators are things you take for granted – things like:
- Product customization or bundling
- Production/supply redundancy and logistics capabilities
- Electronic ordering and tracking
- Real time stock status data, along with exceptional fulfillment (timeliness and accuracy)
- Data analytics you furnish your customer on procurement activity, returns and the use of expedited shipping.
Maybe it’s a combination of little things that simply make life easy for your customers – and the competition can’t quite match. It’s also important to identify sustainable competitive advantages. You might have solid differentiators, but which ones will take your competitors a long time to replicate?
When it comes time to increase prices, companies with clear differentiators are going to have a much easier time than the low price players. These companies have commoditized themselves, so price is their only differentiator – hence the death spiral.
It’s time to take action: With competitive conditions and pricing pressures on the rise, it’s time to identify what makes your organization unique, and vigorously exploit those differentiators to capture market share and increase profits.
How long has it been since you identified or re-assessed your competitive advantages?